Pay for financial sector executives expected to rise

Global financial services executives anticipate base salary increases of between 2.2% and 2.5% in 2013, according to research by consultancy Mercer.

The Financial services executive compensation snapshot survey, published this week, analysed pay data for senior executives across 63 banks and insurance organisations operating in 21 countrie across Asia, Europe and North America.

The report covers forecasted 2013 salary shifts, annual incentive movements, changes to compensation-level setting, as well as estimating the popularity of clawback policies.

The survey also found that:

  • 49% of chief executive officers (CEOs) surveyed expect to have pay freezes in 2013, while only 20% of respondents anticipate pay freezes for other executives.
  • 30% of respondents expect 2013 bonus pools to be smaller than in 2012.
  • 14% of respondents plan to increase the weight of long-term incentives for CEOs.
  • About half of the organisations surveyed indicated that total direct compensation, which is the sum of salary, annual incentives and long-term incentives, has increased compared to three years ago.
  • 74% of respondents also have a ‘malus’ policy in place, where no deferred incentive or long-term incentive is paid out when performance conditions are not met.
  • 20% of respondents indicated that actual unvested awards have been reduced in 2012 and 2011.
  • 53% of organisations surveyed have a clawback policy that recoups vested amounts when individual, firm-wide or business unit performance conditions are not met.

Vicki Elliott, global financial services talent leader at Mercer, said: “The financial services industry has dramatically changed compensation programmes and levels in the past three years.

“Organisations continue to face economic and regulatory uncertainty. Regulators are watching their compensation policies and decisions with great interest.

“It is clear that banks, in particular, have made many changes to their compensation structures to be more aligned with regulator expectations and better protect themselves against unexpected developments in business outcomes over a multi-year timeframe.”

Dirk Vink, senior consultant and survey project manager at Mercer, added: “Banks are acutely aware that large pay rises for their senior staff during a time of austerity would attract attention, and this underpins the evident restraint on CEO pay.”