Trends in executive remuneration
Altair hosted a lively seminar session with Devonshires last week on trends in executive remuneration in the housing sector. I did the backward looking numbers bit, with a bit of insight into other sectors, Fiona Underwood looked forward into the potential future trends and Devonshires led sessions on governance requirements and contracts.
One of the major themes to emerge from the session was the role that variable pay (i.e. bonuses) has to play in executive reward. Altair’s own research suggests that around a third of organisations in the sector operate an executive bonus scheme, but this increases to nearly three quarters of the largest 25 RPs. Based on recent experience, the prevalence of bonus schemes also appears to be on the up in the sector.
But the session didn’t just focus on ‘traditional’ bonus schemes. There was a lot of discussion around ‘LTIPs’ (long term incentive plans, i.e. where performance is assessed over a three year period or longer) and deferred bonus schemes (where payment of the bonus monies is withheld for a number of years) and the benefits / challenges each approach has.
Commonplace in the commercial sector, few in the housing sector operate such approaches at present. The potential of schemes such as LTIPS and deferred bonuses is really looking to the longer term focus they can create, both in terms of performance but also stability and planning.
I’m not sure how many of the attendees rushed away to start developing their own LTIP, but it is clear that such schemes may form an important future role in the armoury of remuneration committees in the sector.
With any bonus scheme comes the need for robust governance arrangements with transparency on performance and levels of reward. Another learning point from the commercial sector, noted the during seminar, was the role shareholders play in scrutinising executive remuneration. Obviously the sector doesn’t have shareholders in the same way, the nearest equivalent might be customers, and most RPs do have customer scrutiny arrangements. Customers scrutinising executive remuneration? Now there’s a thought.
For more information contact Michael Appleby on 07545 314 749 (mobile) or email: firstname.lastname@example.org.