There is generally positive alignment between changes in TSR and in ECAP year over year, though compensation policies appear to be more sensitive to falling TSR than to rising

May 31, 2023

What the New Disclosures Say About Pay vs Performance

What the New Disclosures Say About Pay vs Performance

Below is an excerpt from ISS Corporate Solutions’ recently released paper “What the New Disclosures Say About Pay vs Performance” The full paper is available for download from the ISS Corporate Solutions (ICS) online library.

The Securities and Exchange Commission last year implemented new rules to help stakeholders track the relationship between a company’s performance, as measured by total shareholder return, and executive compensation. ISS Corporate Solutions examines disclosures made since the rule took effect in October 2022 to see how closely pay and performance were aligned.

Key Takeaways:

  • Compensation year-over-year was in line with TSR for 83 percent of the CEOs and 88 percent of the other named executive officers in our analysis
  • In 2021, the alignment was closer, at 98 percent for both CEOs and NEOs
  • Comparing compensation actually paid (ECAP) with TSR, we found that remuneration fell in line with a declining TSR more often than it rose with an increasing TSR
  • CEOs and NEOs at companies that outperformed their peers received about twice as much median actual compensation than their peers at underperforming companies

By: Paul Hodgson, Senior Editor, ISS Corporate Solutions 

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