Though not surprising, the latest research on executive compensation confirms companies are moving away from stock options and toward more performance awards as stockholders, shareholders, boards and the public cast ever-skeptical eyes on pay for pay's sake, not tied to actionable goals.
The latest analysis of compensation and benefits for CEOs at 240 companies in the Standard & Poor's 500 from New York-based Mercer shows use of performance awards continues to climb. Performance shares, used by 41 percent of those companies in 2011, became a majority practice in 2013, used by 51 percent of respondents.
At the same time, the prevalence of stock options continued to fall in 2013, with just 25 percent of S&P 500 CEOs receiving option grants, down 10 percentage points since 2011.
"In practice, performance awards are more closely aligned to explicit financial or operational outcomes than stock options," says Ted Jarvis, Mercer's global director of data, research and publications. That said, though, "the performance measures and associated goals must reflect the company's strategic objectives for performance shares to be meaningful incentives." -Kristen B. Frasch, Human Resource Executive Online
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