Globally, investors are becoming increasingly forthright with their views on executive pay driving responsible executive remuneration practices around the world. Through the slides we share the highlights of key executive rewards trends in US, Europe and particularly Asia Pacific. You may also view the entire audio and web recording on : http://bit.ly/JwjNBa

1. WEBCAST
EXECUTIVE REWARDS 2012:
ASIA PACIFIC AND GLOBAL TRENDS

2. Asia Pacific: Current Executive Rewards Landscape
What companies in Asia are dealing with
Governance: • Developing a remuneration policy and for whom?
Higher Level
• Drafting remuneration committee report and more transparent
Accountability on Boards
communication with shareholders
• Hong Kong & • Advice on how disclosure can be enhanced, including on
Singapore: Enhanced decision making process
disclosure requirements
• How to align remuneration with strategy
• India: compensation
guidelines for Banks – Much more detailed assessment of performance against
both annual- & long-term objectives
• Australia: two negative – Development of individual performance scorecards for STIs
AGM votes on and collective scorecards for long-term plans
Remuneration
Committee report can • Financial & Non-Financial Performance Metrics
result in Board spill • How to simplify our executive remuneration structure?
• Charter and work plan for remuneration committee
• Advice on actual equity grant process
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3. Asia: Current Executive Rewards Landscape
Results of Mercer’s Executive Rewards Snapshot Survey
• Base pay increases in developing Asia Pacific still higher
Base Pay than in the developed world
• But increases for FY13 likely to be lower than in FY12
• Asian companies in Asia provide more aggressive incentive
Structure of Pay pay (STI and LTI) compared to Western companies in Asia
• Greater flexibility
• More balanced approach to top- and bottom-line measures
Definition of Performance
• More discretionary
• Increased usage of both service and performance contingent
Type of Plan restricted share plans
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4. Asia: Current Executive Rewards Landscape
Results of Mercer’s Executive Rewards Snapshot Survey
• Asian companies more inclined to irregular, ad-hoc grant
Characteristics patterns
Of LTI Plans in Asia
• Asian companies are:
– Making changes to their LTI plans (30%) – in light of
economy, global market trends and to gain competitive
advantage
– Larger grant size (36% expect increase)
– More individual differentiation (27% expect increase)
– Greater usage for retention purposes (18% expect
increase)
– Use of stock options (9% expect decrease)
– Used of cash- based LTI (18% expect decrease)
For more details on 2011/2012 Asia Executive Remuneration Snapshot Survey - click here
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5. US: Pay/Performance, legislative and regulatory trends
• Changes in US executive compensation levels and practices are modest as
political, shareholder, and societal focus remains high
• Executives saw base salary increases in 2011 in line with other employees
(about 2% at median), a trend expected to be continued in 2012
• Prevalence of long-term incentive vehicles continues to shift away from
service-based restricted stock in favor of performance awards
• Say on Pay (SOP) and institutional shareholder groups continue to exert a
strong influence on executive compensation in the US
– SOP became mandatory for most US public companies in 2011
– In 2011 and to date in 2012, approximately 98% of companies received
majority support for their executive pay programs
– Institutional shareholder advisors, such Institutional Shareholder Services
(ISS) and Glass Lewis & Co., are significantly influencing SOP vote results
Sample: 233 companies in the S&P 500 Index.
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6. Europe: Current trends
“The shareholder spring”
Country Shareholder activism
The shareholder spring has seen the resignation of three Chief Executives
• Andrew Moss resigned from Aviva after 59% of shareholders did not back the remuneration report
• AstraZeneca Chief Executive David Brennan recently announced his resignation, following
shareholder pressure
UK • Sly Bailey of Trinity Mirror has resigned amid growing shareholder anger over remuneration
At William Hill 49.8% of shareholders voted against director pay packages
31.5% of Barclays' shareholders (including abstentions) failed to back its remuneration report after
Chief Executive Bob Diamond took a £17.7 million pay package for 2011
Just over 30% of Premier Foods shareholder votes failed to back the remuneration report
Almost 37% of UBS shareholders voted against the bank’s compensation report, after the bank took a
Switzerland $2.3 billion loss from unauthorized trading
31.6% of Credit Suisse investors opposed the bank's remuneration plan
US voting advisory firm, Glass Lewis, has recommended that Deutsche Bank investors do not sign
Germany
off on the supervisory boards actions in 2011, this was sparked by investors anger at a lack of clear
succession planning at the bank.
There has been a notable increase in shareholder activism in Europe, led by the UK
Investor discontent is increasing, particularly in the financial services sector, with an outbreak of “no”
votes on remuneration reports being seen
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7. The changing face of executive rewards
Executive rewards pressures around the world
Legislative or Regulatory Response to Speed and Global Nature of Change
Shareholder Discontent
• Dialogue within annual cycle not over
• Potential for binding vote on executive pay interim period between cycles
• More specific rules on pay constructs • Globalization of governance cycle
• “Shareholder Spring” in UK • Increased speed of change
Focus on Performance Outcomes are Key
• Shareholder advisory group “pay for • Definition of performance goals / objectives
performance” tests • Focus on long-term plans
• Performance relative to home economy • Model outcome scenarios; partnership with
finance
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8. Additional details
To view the full audio and web portion of the webcast - click here
For further insight into executive remuneration trends, visit
www.mercer.com/perspective or www.mercer.com/erperspectivesasia
Hans Kothuis
Asia Pacific Business Leader – Rewards Consulting
Mercer
+852 3476 3817
hans.kothuis@mercer.com
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