Sixty-one percent of companies expect to pay the same or higher executive bonuses this year, and the same percentage anticipates that shareholder value in 2011 will remain flat or decline, according to a Towers Watson survey.
Broken down, 17% of the 265 midsize and large companies that were surveyed expect the incentive awards to be above or significantly above last year's level, while 44% expect them to be about the same and 40% expect them to be below or significantly below, according to the report, “Managing Executive Incentives in a Volatile Market.” The numbers don't total 100% due to rounding, the report noted.
Also, 13% expect total shareholder return to be down significantly from last year and 29% expect it to be down slightly or moderately, while 19% expect it to be flat, 30% up slightly or moderately and 9% up significantly.
In all, 85% cited earnings per share or other profit measures as the performance metric used to determine funding for annual executive bonus plans, while only 3% cited total shareholder return, or stock price growth
Eighty-seven percent don't expect the compensation committees of their company's boards of directors will exercise discretion to override plan formulas; 6% expect their committees to reduce the bonus payment levels, while 7% expect their committees to increase them.
Also, 75% expect their companies to keep the same incentive plan design for their next fiscal year and 72% expect to keep the same performance measures.
Towers Watson conducted the online survey in the second half of October. Sixty-eight percent represented midsize and large publically traded companies, 23% privately held companies and 9% not-for-profit companies. For performance metrics used to determine bonus-funding levels, 66 respondents were surveyed.