激励机制知识[英文版](ppt 18页).ppt

A 0 FinancialIncentives PerspectivesandImplementationGuidance A 1 CONTENTS PerspectivesonfinancialincentivesImplementationguidelinesExhibits A 2 EMERGINGPERSPECTIVESONFINANCIALINCENTIVES A 3 EMERGINGPERSPECTIVESONFINANCIALINCENTIVES CONTINUED A 4 KEYISSUESTOADDRESSWHENDESIGNINGANINCENTIVESYSTEM Whatdrivesbasicsalaryandsalaryincreases Whatkeyindicatorsmakeupthe gate toannualorlong termincentives Howdoyoudeterminerealisticstretchtargetswithinmanagementcontrol butwithoutgoingintodetailedannualnegotiation Howsteeplydoestherewardincreaseasmanagersapproachtheiragreedstretch Howdoappropriateorinappropriatebehaviorsimpacttherewardlevel Howisperformancebeyondstretchrewarded Whatcombinationofshort andlong termincentivesisappropriate Whatistherightmixoffocusonindividualandgroup peergroupresults Exhibits8 11providemoredetailandcaseexamplesastheunderlyingmentalmodelforincentivedesigns A 5 Step1 Translateoverallstrategyintospecifictargets2 Establishguidingprinciples3 Conductcompetitivebenchmarking4 Designhigh levelcompensationframework5 Developcompensationprogrambycategoryofseniormanagement6 Stress testthecompensationprogram7 Determinelegalandtaximplications8 Implementindividualplans9 Designimplementationapproach10 Createongoingmanagementprocesses BriefdescriptionClarifyinggrowthaspirationintermsofclearvaluedrivers typically3 5 e g AUM earnings EVAtm etc Developingsetofguidingprinciples e g levelofconformancetocompany scompensationpolicies useofvariablecompensation levelofdeferredcompensation etc Benchmarkingcompetitivecompensationlevelsandstructures upper lowerquartilesforeachlevel etc Foreachcategoryofseniormanagement establishcompetitivecompensationlevelsDefiningoverallcompensationframeworkintermsofthreefactors Compositionandvariability i e salaryvs incentivesTiming i e currentvs deferred vestingperiodInstruments e g cash companystock options XYZphantomstockLinkingvaluedriversandthecompensationprogramDeveloprobustperformancemetricstailoredtoeachcategoryofseniormanagementDesignincentivestooptimizeperformancemetrics usingcompensationframeworkTestingrobustnessofcompensationsystembymodelingthepay outunderavarietyofscenarios e g differenceperformancelevelsandmarketconditions andmodelingaggregateimpactofpay outonXYZoverallfinancialresultsIdentifyingpotentialadverseincentivesandloopholescreatedbythesystemClarifyinglegalandtaximplicationsofnewcompensationplansandidentifyingpotentialissuesoverallDefiningunambiguousterminationconditions administrationresponsibilities limitsonawards redemptionprocesses non competitionconditions taxwithholdingpolicies etc Developingindividualplansconsistentwithcategorycompensationprogram keepinginmindtheguidingprinciplesandcompetitivebenchmarkingNeedstobeinthecontextofcurrentcompensationlevelsandofcompetitivebenchmarksCreatingcleardocumentationandcommunicationmaterialsConductingaseriesofmeetingwithkeyindividualstoplanroll outDevelopingthegoal setting performancereview andcompensationcycleCreatingcontingencyplansforchangesinenvironment e g fallinphantomstockprice STEPSINDESIGNINGNEWCOMPENSATIONSYSTEM A 6 Revisebasedonfinancialimpact perverseincentives etc Conductinparallelwhilebuildingcompensationprogram Revisebasedonlegal taxissues OverallsuccessandspeedofprocessdependsonQualityofexistingcompensationsystemDegreeofchangeimposedbynewsystemCompensationframeworkPerformancemetricsIndividualcompensationAbilitytotrackandconfidenceinnewperformancemetricsManagementprocessinfrastructure e g performancereviews etc PROCESSFORDESIGNINGNEWCOMPENSATIONSYSTEM 1 Translateoverallstrategyintospecifictargets 3 Conductcompetitivebenchmarking 4 Designhigh levelcompensationframework 5 Developcompensationprogrambycategoryofseniormanagement 6 Stress testcompensationprogram 7 Determinelegalandtaximplications 8 Implementindividualplans 9 Designimplementationapproach 10 Createongoingmanagementprocesses 2 Establishguidingprinciples A 7 Exhibits Appendix1 A 8 ExecutiveteampayMedian Thousand 1 990 1 500 ExecutiveteampaybreakdownMedian percentoftotalpay Basepay At riskpay ValuedwithBlack Scholes indexedto1997dollarsSource Dr RakeshKhurana MIT Dr BrianHall HBS Evergreencompanydatabase Sharpbenders executivesgetpaidwithlargerportion atrisk Equityandoptions marketcapitalizationsMedian percent 1992 96 EquityandoptionsMedian Thousand 1992 96 andholdmuchlargerequitystakes Winners Losers WINNERSPAYMOREANDUSELONG TERMINCENTIVES 100 100 Winners Losers CEOonly Top5executives Winners Losers 58 1 6 7 20 4 3 6 Winners Losers CEOonly Top5executives Winners Losers 1 5 0 5 1 2 0 8 Winners Losers 2 7 1 3 A 9 Top20executives Morethan15 abovebenchmarkaverage Upto15 abovebenchmarkaverage Atbenchmarkaverage Upto15 belowaverage Morethan15 belowaverage Top300executives TOTALCOMPENSATION Averagepercentofcompaniesresponding Source TT sWarforTalentExecutiveSurvey finalresultsbasedon72companies Total Top quintilecompanies Mid quintilecompanies Total Top quintilecompanies Mid quintilecompanies A 10 Top20executives Morethan15 abovebenchmarkaverage Upto15 abovebenchmarkaverage Atbenchmarkaverage Upto15 belowaverage Morethan15 belowaverage Top300executives SALARY Averagepercentofcompaniesresponding Source TT sWarforTalentExecutiveSurvey finalresultsbasedon72companies Total Top quintilecompanies Mid quintilecompanies Total Top quintilecompanies Mid quintilecompanies A 11 Top20executives Morethan15 abovebenchmarkaverage Upto15 abovebenchmarkaverage Atbenchmarkaverage Upto15 belowaverage Morethan15 belowaverage Top300executives ANNUALCASH Averagepercentofcompaniesresponding Source TT sWarforTalentExecutiveSurvey finalresultsbasedon72companies Total Top quintilecompanies Mid quintilecompanies Total Top quintilecompanies Mid quintilecompanies A 12 Top20executives Morethan15 abovebenchmarkaverage Upto15 abovebenchmarkaverage Atbenchmarkaverage Upto15 belowaverage Morethan15 belowaverage Top300executives LONG TERMINCENTIVES Averagepercentofcompaniesresponding Source TT sWarforTalentExecutiveSurvey finalresultsbasedon72companies Total Top quintilecompanies Mid quintilecompanies Total Top quintilecompanies Mid quintilecompanies A 13 Total Top quintilecompanies Mid quintilecompanies COMPENSATIONSTRUCTUREANDMIX Averagepercentofbasesalary Futurevaluefor100 targetattainment ValueatgrantSource TTWarforTalentHRexecutivesurvey finalresultsbasedon72companies Annualbonus Valueoflong termincentives Performanceunitsorshares Performancevestedrestrictedstock Timevestedrestrictedstock Unrestrictedstockgrants Stockoptions Top20 Top300 A 14 Total Narrowgradesorranges 5 to20 differentbetweenmid points Broadbands morethan20 differencebetweenmid points Top quintilecompanies Mid quintilecompanies WIDTHOFSALARYGRADES BANDS Averagepercentofcompaniesresponding Source TTWarforTalentHRexecutivesurvey finalresultsbasedon72companies A 15 Reward ExtentofachievementFinancialBehavioralOthermilestones Salary Target Agreedstretch Beyond Howcanstretchbeyondexpectationbeappropriatelyrewarded Whatistheshapeoftheslidingscale Howdoeslessappropriatebehaviorimpactthemultiplier Whatconstitutesrealisticstretch Whatdrivessalaryincrease Whatshoulddifferentiationbeforachievingagreedstretch Whatcombinationoflong andshort termincentivesareappropriate Whatisthemaximum Whatkeyindicatorsmakeupthe gate SELECTINGANINCENTIVESAPPROACH A 16 Reward ExtentofachievementFinancialBehavioralOthermilestones Target Agreedstretch Beyond One offbonussharesawardedforexcellentperformance Redeemableafter5years Averageof3 000shares approx 60 share Rewardforbehaviornotsystematicbut 360outputwhendoneistakenveryseriously Poorbehaviorwillresultinreducedopportunityordismissal notnecessarilyinreducedcashbonus Emersonrenownedfortoughstretch Exampleof 100mbusinesstobecome 500min5years SalaryjustabovemedianfortheindustrySalaryincreasedrivenbyaffordability personalperformanceandpotential DifferencebetweenOKandgood20 30 ShareoptionsawardedbyCEOforgoodperformanceandbehaviour every3years Cashbonusmaximumonaveragec 60 EBITisthemaindriverofthe gate INCENTIVESAPPROACH EMERSONELECTRIC A 17 Reward ExtentofachievementFinancialBehavioralOthermilestones Target Agreedstretch Beyond Drivenprimarilybyamountofshareoptionsandtargetingforrapidpromotion Deductionsmadefrommaximumbonus ifnon financialgoalsarenotmet Rigorousannualplanningprocesswheretargetsareset Don ttalkabout stretch inthesameway SalaryatorabovemedianfortheindustrySalaryincreaseinhandsofP Lmanagementbutstillrelativelyformulaic DifferencebetweenOKandgoodhasbeen15 30 Shareoptionsawardedbasedonagreedformula Cashbonusmaximumoftheorderof50 Gate isprimarilyfinancials butnotalwaysmechanical Tendstobeatseniormanagementdiscretion INCENTIVES