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2012/2013 Asia Executive Remuneration Snapshot Survey


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The Asia survey report is available for US$1,500.

The India survey report is available for US$750.

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The scrutiny around executive pay has not abated and continues to intensify. Shareholders, corporate governance advocates, legislators and regulators are demanding increased transparency in executive remuneration programs and stronger alignment of pay for performance programs. As a result, all decisions made are likely to be dissected even more closely, and executive management and committees are under increasing pressure to be responsive and accountable to the stakeholders and to address their concerns.

To help understand the current and emerging trends, Mercer conducts the Asia Executive Remuneration Snapshot Survey annually. For the 2012/2013 survey, we received participation from 670 respondents across Asia, which is more than triple the number (201 companies) participating in last year’s survey. This is reflective of the growing interest in executive compensation practices in the region. Of the participating companies, 34% are firms with headquarters in Asia and 66% have headquarters in the West.

SURVEY HIGHLIGHTS

The survey shows that companies in this region are increasingly joining the rest of world in adjusting and reforming their pay programs in light of demands for more transparency and better governance, so as to continue to attract and develop executive talent. There is also a growing realization that the trend of very high executive pay increases in Asia cannot go on and that executive pay in Asia will have to operate according to a different pattern.

The main issue companies in Asia are facing is no longer just one of executive retention and demand for executive labor, but rather one of leadership development, motivation and succession planning. The leadership pipeline is routinely cited as one of the biggest challenges facing organizations across the region, and it continues to be a top-priority area of focus for companies.

Instead of focusing solely on profit and revenue growth, companies in Asia are increasingly seeking to create value, gain better returns on their investments and to become not just big, but also strong. Companies are adding new metrics to their incentive plans, adding risk management practices into the design and operation of their incentive plans, using multiple long-term incentive (LTI) plans and increasing the disclosure of executive pay details. The companies operating in Asia are now keenly aware that their policies in executive pay governance need to keep up if they want to continue to attract the flow of financial and human capital to the region.

In Mercer’s estimation, the trend toward multiple measures and lenses to assess performance will create more sustainable businesses and strong franchises — a step in the right direction. Executives should be rewarded for the incremental value they create, not just in their company’s current operations through margin improvement and efficiency, but especially through innovation, diversification and new business models that stretch beyond the here and now.

Asia increasingly requires further reform of its executive labor markets, commensurate with that of the developed economies. The trend toward better disclosure of executive pay policies and levels, as evidenced by this survey, is helping improve the market for executive talent. Asia’s budding young executives demand this, and the international investors on which Asia will increasingly depend for its growth in GDP look for good corporate governance.

KEY FINDINGS

  • Western companies operating in Asia seem to have lowered their expectations on profitability levels in 2013. Fewer Western companies than last year are expecting an increase in profits, and more of them are expecting a decrease.
  • The Asian and Western firms have different priorities in terms of where they must focus their energy. Asian firms believe that succession planning (75%) is their most important challenge to tackle. Retention is considered very important by just 63% of Asian firms, as compared with 73% by Western firms operating in Asia.
  • Asian firms tend to provide slightly less in the form of LTIs when compared with Western firms, but they are just as incentive oriented, if not more so, when compared with their Western counterparts. The fixed-pay element for Asian companies has increased as compared with last year for all executive levels, and it is now quite comparable to that offered by the Western firms.
  • Compared with last year, non-financial and value-based measures have become considerably more prevalent and are increasingly being incorporated in annual bonus plans in addition to the traditional metrics of profit and revenues.
  • Keeping steady with the trend of the previous year, 57% of the companies surveyed have an LTI plan in place. Of the companies offering LTI plans, about half provide more than one type of plan.
  • The prevalence of share options continues to diminish, while the use of restricted share programs (service based) continues to increase. The use of full-value performance-based shares, either performance shares or performance-contingent restricted shares, has remained predominantly the same over the years.
  • Compared with 2012, more Asian companies are planning to increase the maximum bonus amount for stretched performance in 2013. Meanwhile, the opposite trend is anticipated for Western companies.
  • Similar to last year, the top-three disclosure enhancements are focused on clearly explaining the rationale for all pay decisions, providing more information about incentive plans, and increasing disclosure of individual pay details for top executives.

USING THE SURVEY FINDINGS TO ASSESS YOUR EXECUTIVE PAY PROGRAMS

In the 2012/2013 Asia Executive Snapshot Survey report, we provide an examination of and insight into survey findings, which primarily encompass executive compensation trends, short-term incentive (STI) and LTI plans and expected changes in 2013. In addition, we also offer our view as we look ahead to emerging trends in executive compensation. Mercer hopes that the report will help clients in shaping their executive compensation strategies.

HOW MERCER CAN HELP WITH EXECUTIVE REMUNERATION

Mercer’s Executive Remuneration consultants are trusted advisers to leading companies. Our holistic approach, supported by our proven analytical tools and delivered through our global network of recognized consultants, considers the business, performance, regulatory and governance implications of executive total remuneration. The result is responsible executive remuneration plans that drive business performance and value creation, secure key talent and withstand external scrutiny.

CONTACT US

If you have any questions regarding the survey findings or any other executive remuneration related issue, please contact Dr. Hans Kothuis.