ARLINGTON, Va., Dec. 20, 2016 (GLOBE NEWSWIRE) -- Annual bonuses for U.S. corporate executives in 2016 will be decidedly mixed, a reflection of the wide variation in industry-by-industry corporate performance this year, according to a poll by Willis Towers Watson (NASDAQ: WLTW ), a leading global advisory, broking and solutions company. The poll also found that while many companies believe the mandatory say-on-pay shareholder vote has been positive, more than a quarter of respondents believe the rule may no longer be necessary.
More than a third of the companies polled (36%) expect to pay annual bonuses for 2016 performance that exceed 110% of target, while roughly the same number (35%) anticipate paying bonuses at 90% of target or below. The balance (29%) expect to pay annual incentives close to target. The poll of 260 corporate executives and compensation professionals was conducted December 8 during the Willis Towers Watson national webcast on the 2017 proxy season.
“We were somewhat surprised that so many companies expect to pay bonuses well above target for 2016 performance, given the relatively tepid growth in revenue and earnings in many industries this year,” said Andrew Goldstein, leader of the Executive Compensation practice in North America, Willis Towers Watson. “While the stock market, and thus shareholder returns, surged late in the year, the underlying corporate financial performance for much of 2016 was mediocre overall, which might have suggested a continuation of the downward trend in bonus payouts that we saw in 2015. But without question, third quarter financial results improved, so the strength of the fourth quarter could alter the balance.”
Overall, nearly half of the respondents (47%) said the impact of mandatory say-on-pay voting has been very or generally positive. Interestingly, more than a quarter (29%) said while the Dodd-Frank requirement has been generally positive, it’s probably no longer necessary. Only one in 10 said the voting has had a negative impact, and just 4% favor repealing it.
“It will be interesting to see how corporate America responds if the Trump administration moves to repeal Dodd-Frank outright,” said Goldstein. “Our findings suggest that most companies are fairly comfortable with say on pay, in part because institutional investors and proxy advisors would be more likely to oppose the reelection of compensation committee members or other directors in the absence of the say-on-pay vote. While the fate of other Dodd-Frank rules, such as the CEO pay ratio disclosure, is clearly up in the air, it’s quite possible that many companies would continue conducting say-on-pay votes voluntarily even if the Dodd-Frank requirement is repealed.”
The poll also found the vast majority of respondents (83%) currently have some type of clawback policy in place that covers fraud, misconduct or financial restatements, or a combination of those. While most of these companies aren’t likely to expand their policy, roughly one in 10 respondents say they’re likely to consider expanding their clawback policy to cover situations that result in significant financial or reputational harm.
“Recent company situations have forced many boards of directors to consider ‘what if that happened here’ scenarios. We strongly recommend companies carefully review their clawback policies to ensure they’re broad enough to permit a clawback for circumstances that result in significant financial or reputational harm to the company. Boards need to consider how shareholders might react if they weren’t empowered to use their discretion to hold back or recoup incentive compensation in these situations,” said Goldstein.
About Willis Towers Watson Willis Towers Watson (NASDAQ: WLTW ) is a leading global advisory, broking and solutions company that helps clients around the world turn risk into a path for growth. With roots dating to 1828, Willis Towers Watson has 39,000 employees in more than 120 countries. We design and deliver solutions that manage risk, optimize benefits, cultivate talent, and expand the power of capital to protect and strengthen institutions and individuals. Our unique perspective allows us to see the critical intersections between talent, assets and ideas — the dynamic formula that drives business performance. Together, we unlock potential. Learn more at willistowerswatson.com.
Media contact Ed Emerman: +1 609 275 5162 eemerman@eaglepr.com
