Most outside directors believe legislation and public pressures won’t have much impact on stronger links between executive pay and corporate performance at U.S. companies, according to a Watson Wyatt Worldwide survey released today.
Thirty-one percent of the 85 directors believe there will be no effect, while 23% believe the effect will be small, 28% moderate, 14% significant and 4% great.
Also, 8% had great concern over retaining talented executives under current economic conditions, 23% significant, 31% moderate, 29% small and 8% unconcerned. Percentages may not total 100% due to rounding.
Thirty percent believe executive pay opportunity — base salary plus actual annual incentives earned, plus the value of long-term incentives — will decline a significant extent over the next two years, 6% believe it will decline to a great extent, 34% to a moderate extent, 20% to a small extent and 10% not at all.
A combined 63% strongly agree or agree that companies need to make executive compensation changes in reaction to the financial crisis and new regulation for government-assisted companies, 16% disagree, 6% strongly disagree and 16% had no opinion, the survey found.
“Shareholders and the general public will support that directors are looking to change their executive pay programs to reflect the economic crisis,” Ira Kay, global director of executive compensation consulting at Watson Wyatt, said in a statement about the survey. “We are confident that boards will continue to hold management directly accountable for their company's performance.”
Some 34% of the directors’ companies have already reduced compensation in some combination of cutting salaries, bonuses or long-term incentive awards, while 6% plan to do so in the next six months, 48% are considering it and 12% don’t know, the survey found.
