Executive Reward
Designing the optimum package to meet the needs of all stakeholders.
Corporate governance failures around the world have led to closer public scrutiny of companies and their remuneration committees. There is a new emphasis on greater disclosure of pay and performance and a strengthening of the role of non-executive directors. Major investors are increasingly flexing their muscles and governments are taking an increasing interest in this area.
How should remuneration committees respond and what can their advisers do to help them? First and foremost is the need to maintain trust, for both parties to demonstrate their independence, integrity and their intention to focus on the interests of shareholders.
Watson Wyatt’s executive reward consultants work for the remuneration committees of a whole range of companies, ranging from large multinationals to smaller quoted and unquoted companies.
Our consulting philosophy is:
- Based on understanding an organisation’s business strategy, together with its culture and desired remuneration philosophy
- Driven by research, with a focus on ensuring a clear linkage between remuneration packages and key business metrics
- To ensure that the full financial implications of changes to remuneration packages, such as dilution and accounting costs, are fully understood and allowed for
- Predicated on our belief that advice on remuneration packages should cover not just the detailed design of particular components (such as the structure of incentive vehicles), but should also address how best to spark the enthusiasm and commitment of senior management and shareholders alike.
How we can help
Our team of consultants includes professionals in human resources, actuarial science, tax, law, accounting and employee communication. Our advisory services focus on the following:
- Being the trusted counsel to remuneration committees whether on remuneration strategy, the annual ‘pay round’ or ad hoc assignments, such as the introduction of new long-term incentive arrangements. We work closely with executive management, for example, to understand business strategy and culture of the organisation
- Helping companies ensure that they comply with the local corporate governance framework, whether set by legislation, stock exchange or institutional investors. We meet regularly with these bodies to ensure that we are fully aware of emerging trends
- Giving access to important and up-to-the-minute competitive market data on executive remuneration. Watson Wyatt has a number of databases which we can call on for this purpose. These cover not only cash compensation, but also practice and valuation of long-term incentives and pensions
- Designing and implementing short and longer-term cash and share incentive plans, including the development of appropriate performance measurements and benchmarking performance against comparator companies
- Using Watson Wyatt’s proprietary long-term incentive valuation methodology, Present Economic Value (PEV), to place an appropriate value on long-term incentives for the purposes of:
- Benchmarking executives’ total compensation packages
- Assessing these values with other components of the organisation package (for example, basic salary and annual bonus) to determine an appropriate mix
- Communicating the value of long-term incentive awards to employees (for total compensation statements for example)
- Executive pension arrangements, such as costings and disclosures, together with developing funded and unfunded pensions earnings cap solutions
Why Watson Wyatt?
Our clients choose to work with us because:
- We are committed to aligning the structure and quantum of remuneration packages with a company’s business strategy and performance
- We have professional/ethical standards, developed over many years, in our role as the trusted counsel to remuneration committees
- We are committed to innovative concepts/methodologies, such as Present Economic Value (PEV)
- Of the strength of our remuneration databases, covering not only cash pay but total compensation
- We have global reach, with over 80 offices worldwide, and major executive reward consulting teams in Europe, Asia Pacific and North America.
| 
