Good practice trend emerges in exec remuneration

The Remco (remuneration committee) season is under way and organisations below FTSE-100 level are leading the way with good-practice executive remuneration design and reporting, according to consultants.

Deborah Rees, director of consulting at Innecto Reward Consulting, said: “There is some very long and hard thinking going on about the things that make a business successful in the short and long term, and how these can be combined effectively into a plan that rewards executives but also gives some return to the stakeholder.”

Rees said this good-practice approach is not yet typically being used in the FTSE 100, but rather by employers with different types of ownership structure, such as partnerships or mutuals.

In the FTSE 100, remuneration and bonus packages have traditionally looked at total shareholder returns (TSR), earnings per share (EPS) or at what other employers in the sector are doing.

Rees added: “That shared mentality has ended up with a template approach to executive remuneration, and they are not really thinking about what makes their business different.”

Andrew Page, partner at New Bridge Street, added: “Employers have started to look at how to put aggressive growth measures into their long-term plan, and look at what is right for them.”

Insurance firm NFU Mutual has aligned its executive remuneration plan with its long-term goals, such as being a great place to work and achieving sustainable and profitable growth.

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“It has put in some long-term measures, which are measurable, and has said these are the things it is working towards,” said Rees. “It is a willingness to engage with wider issues, rather than just being very focused on a small basket of measures, most of which are financially based.”