Use of Stock Incentives Up Worldwide

On average, companies this year are awarding their chief executive officers bonuses equal to 26% of base salary, up from 21% in 1996. During the same period, the value of long term incentive (LTI) packages for chief executives were 35% of base salary, up from 20%.

Towers Perrin’s annual Worldwide Total Remuneration report found that while American firms continue to lead the trend, other nations are catching on, encouraged by:

• competitive pressures to attract and retain talent in a global talent pool
• the ongoing move to privatize government-controlled enterprises
• the growth of local stock exchanges
• additional cross-border investment opportunities for individuals

The report examined practices in 26 countries and found that US companies granted their Chief Executive Officers (CEOs) LTI awards (primarily stock options) equal to 111% of base salary, a significant increase from 66% in 1996.

Canada and Malaysia tied for the number-two ranking with LTIs for a typical CEO equal to 90% of base salary, followed by Singapore (71%) and Brazil (54%).

Asian LTI levels ranged form 45%-55% of base pay, while Latin American LTI programs ranged as high as 30% to 40%. Similar programs in Europe only offered 20% to 30% of base salary.

Towers Perrin noted a significant increase in the number of countries where a majority of companies offered long-term incentive programs. In 1996, for example, only 10 of the 26 countries surveyed had already established long-term incentive programs, compared to 19 of 26 countries covered by this year’s report.

Companies in 18 of the countries studied were providing long-term incentives to their HR directors this year, versus just six in 1996.