Make sense of executive incentives with the GRG Variable Remuneration Guide

The alignment of executive performance and rewards is perhaps the most significant remuneration governance issue of our time. Knowing what the market landscape looks like is a critical first step towards reviewing your own at-risk reward and incentive practices in-context, or identifying common alternatives.

The GRG Variable Remuneration Guide offers a comprehensive analysis of the Australian executive incentive landscape. The guide shares key information on short term, long term and hybrid incentive plans; providing information on incentive variables like length of measurement period, typical vesting scales and award deferral practices. It will help you understand how successful ASX 200 companies align executive pay for performance.

Why are variable remuneration plans so important?

The introduction of shareholder voting on Remuneration Reports at AGMs created the risk of a “strike” – 25% or more of the cast votes against adopting the Remuneration Report. The most common cause of such strikes is a failure of the variable structure, either in design or because outcomes don’t match the expectations of stakeholders. Beyond attraction, retention and motivation, there is more pressure than ever for variable remuneration plans to reward the right outcomes, in the right way, rather than just being a “bonus”.

GRG Variable Remuneration Guides cover both short- and long-term incentives

Long-term variable remuneration

  • The main choices in LTVR plans and who’s using them
  • LTVR award values at different market capitalisations over four major industry sectors
  • The impact of grant frequency on remuneration management
  • Valuing equity for remuneration purposes
  • Calculating the number of rights to be granted
  • Determining the LTVR vesting period
  • Implementing most appropriate LTVR performance metric for your company: TSR, Absolute TSR, Relative TSR, Share Price Growth and others
  • Weights and tranches, two inter-related aspects of LTVR design
  • Comparing performance goals and vesting scales for various metrics
  • The use of performance gates
  • LTVR options on takeover/change of control
  • Termination of employment
  • Restrictions on disposal of shares
  • Board discretion on vesting

Short-term variable remuneration

  • Determining the measurement period
  • STVR award opportunities
  • STVR payouts compared to target policy award opportunities
  • Key performance indicators
  • Determining appropriate performance goals for your KPIs
  • Weighting the relative importance of each KPI
  • The use of performance gates
  • Using modifier/multipliers to match awards to company performance
  • How STVRs can be affected by takeover/change of control
  • Configuring STVR plans for terminations of employment
  • Forms of STVR payment including deferral
  • The role of board discretion

Licensing and updates

Our Guides are released in digital form, tailored for and licensed to each purchasing organisation, and delivered promptly within one business day. Internal distribution within your organisation is unlimited, but each publication is digitally secured with licensee identification to ensure that it is not used outside the organisation without the purchase of additional licences.

The Guides are updated mid-year after the prior December reporting company Annual Reports are released and entered for analysis.

Want more information?

Our team of experienced, qualified remuneration professionals is ready to assist you if you have any questions. Get in touch today.