CEO Compensation Sneak Peek: Korn Ferry Analysis Finds Changing Mix of Long-Term Incentives, Aimed at Insulating Against Futu...
March 28 2019 - 9:50AM
Business Wire
– Total Direct Compensation for CEOs at
Analyzed Companies Rises More than 15 Percent –
According to CEO compensation disclosures from the first 50
companies to report, paid packages at the top are showing signs of
being tailored for future economic volatility. Despite current
strong financial results, CEOs are being rewarded with a greater
proportion of time vested longer-term incentives.
That according to an initial sample of the 12th Annual Korn
Ferry (NYSE:KFY) CEO Compensation Study, which examines all forms
of CEO pay at the top 300 companies with revenues of at least $9
billion in fiscal year 2018.
Just in are results for the first 50 companies in the
analysis.
Long-Term Incentives (LTIs) see double digit
increases
- Total LTIs are up 11.2 percent
- The mix of LTIs has shifted:
- Restricted stock (RS) accounts for 30
percent of mix, up from 26.1 percent the previous year
- Options are 23.8 percent of mix, down
from 25.3 percent the previous year
- Performance equity is at 41.7 percent,
down from 44.5 percent
- Performance cash has remained
consistent at 4.5 percent
“These initial findings from the first 50 companies are telling.
We are seeing double digit increases in LTIs, which is the highest
we’ve seen since we began doing the study. What is especially
interesting is how and why the mix has shifted,” said Irv Becker,
Korn Ferry vice chairman, Executive Pay & Governance. “There is
worry about future volatility in the market, so in order to
insulate their CEOs from too much variability in year-over-year
pay, compensation committees are increasing the percentage of
time-based restricted stock and decreasing the percentage of
performance-based equity.”
Overall, CEOs in the analyzed companies are being rewarded with
robust compensation increases. Becker points to strong financial
performance as one of the main reasons. Organizations in the sample
saw an 8.1 percent increase in revenue and a 23.2 percent increase
in net income.
Total direct compensation (TDC), which means annual cash
compensation plus the annualized value of LTIs, is up 15.2
percent from the previous year. The increase in last year’s
full sample was 8.7 percent.
CEO salary and short-term incentives (STIs) are up:
- Salary is up 2.3 percent
- STIs are up 8 percent
- Salary + STIs are up 6.9 percent
“No matter what happens to the market in the future, it’s clear
that performance pays and boards will work to find the right mix of
compensation for CEOs at profitable companies in order to motivate
and reward them to stay,” said Becker.
Editor’s Note:
The complete report, with a data analysis on all 300 companies
in the index, will be available early-to-mid May.
About Korn Ferry
Korn Ferry is a global organizational consulting firm. We help
clients synchronize strategy and talent to drive superior
performance. We work with organizations to design their structures,
roles, and responsibilities. We help them hire the right people to
bring their strategy to life. And we advise them on how to reward,
develop, and motivate their people.
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MEDIA CONTACTTracy
Kurschner612.309.3957Tracy.Kurschner@kornferry.com
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