This new report reveals the results of Compensation Advisory Partners’ analysis of the Pay Versus Performance disclosures in preliminary and definitive proxy statements filed by 25 S&P 500 companies (listed in Appendix) as of March 6.
Among the key takeaways:
Comparator group for TSR—Most companies used an industry index (typically the same index used for the Stock Performance Graph) rather than a custom benchmarking peer group for TSR calculations.
Company-selected measure—Company-selected financial measures (used by all but one company, which selected relative TSR) varied and were typically characterized as non-GAAP or “as adjusted,” with EPS/operating EPS and cash flow being the most prevalent.
Tabular list of most important measures—Companies listed a median of four “most important” financial performance measures. Of the 36% of companies that listed financial and non-financial measures, operational/ESG meausures were the most common.
Explanation of relationships between compensation and performance—The vast majority of companies used bar charts or line graphs rather than just a narrative to describe: (i) the relationship between Compensation Actually Paid to the company’s NEOs and the company’s financial performance measures included in the table (i.e., TSR, Net Income and the Company-Selected Measure), and (ii) the relationship between the company’s TSR and the TSR of the peer group.
Location of disclosure—The vast majority of companies included their disclosure after previously required tables and often near their CEO Pay Ratio disclosure. No companies included the disclosure in their CD&A.
Length of disclosure—Disclosures averaged 4.3 pages, with four pages being the median.
Access additional resources on our Pay for Performance page.
This post first appeared in the weekly Society Alert!