・Higher annual variable pay at Asian companies compared to Western firms operating in Asia
・Asian firms more likely to make changes to long-term incentive plans and increase pay-out targets in 2012
・Increased awareness at Asian firms for better communication with shareholders on pay decisions
Significant differences in executive pay practices between Asian and Western firms operating in Asia were identified by Mercer’s latest Asia Executive Remuneration Snapshot Survey (リンク ») which was conducted among both types of companies.
Annual variable pay tends to be higher at Asian firms compared to Western companies. “Asian companies prefer more flexible pay structures which can be adjusted based on business performance,” says Dr. Hans Kothuis, Asia Pacific rewards consulting leader at Mercer. The performance metrics on which these bonuses are based are more equally balanced between the top and bottom line measures at Asian firms versus at Western firms which tend to place a greater emphasis on profit based metrics (83% at Western companies versus 61% at Asian firms). Asian firms also give more importance to a bonus determination process that is less formulaic and more discretionary.
While long-term Incentive (LTI) plans are more prevalent at Western Firms in Asia (63% versus 45% of Asian firms), the survey shows that more Asian firms (36%) expect to make changes in the design of their LTI plans and to increase the target pay-outs of these awards. “Asian companies are very active in the redesign and re-evaluation of their long-term incentive practices,” says Dr. Kothuis. “One of the biggest changes in the LTI landscape is the decreasing popularity of stock options which has fallen from 58% to 48%.”
Asian companies are also much more likely to pay irregular, ad hoc awards, outside of the annual grant cycle (32% of Asian companies versus 8% of Western firms), for purposes of retention, recognition and promotion. This highlights the fact that retention is one of the top three talent challenges, particularly among Asian firms that are in growth mode.
The Asia Executive Remuneration Snapshot Survey also reveals that Asian companies have an increased awareness of hot-button compensation issues and the need for more engagement and transparent communication with shareholders. “Almost half (48%) of the Asian companies surveyed indicate to us that they plan to explain the rationale for their pay decisions with greater clarity, not only the ‘what’ of compensation but also the ‘why’ and ‘how’,” added Dr. Kothuis.
About the survey
Mercer conducts the Asia Executive Remuneration Snapshot Survey (リンク ») annually. A total of 201 companies took part in the survey from across Asia. Of them, 59% were firms with Asian headquarters and 41% had headquarters in the West. The average annual revenue of participating companies was US$840 million and the average headcount stood at 1,900 employees.
About Mercer
Mercer is a global leader in human resource consulting and related services. The firm works with clients to solve their most complex human capital issues by designing and helping manage health, retirement and other benefits. Mercer’s 20,000 employees are based in more than 40 countries. Mercer is a wholly owned subsidiary of Marsh & McLennan Companies (NYSE: MMC), a global team of professional services companies offering clients advice and solutions in the areas of risk, strategy and human capital. With 52,000 employees worldwide and annual revenue exceeding $10 billion, Marsh & McLennan Companies is also the parent company of Marsh, a global leader in insurance broking and risk management; Guy Carpenter, a global leader in providing risk and reinsurance intermediary services; and Oliver Wyman, a global leader in management consulting. For more information, visit www.mercer.com. Follow Mercer on Twitter @MercerInsights
Annual variable pay tends to be higher at Asian firms compared to Western companies. “Asian companies prefer more flexible pay structures which can be adjusted based on business performance,” says Dr. Hans Kothuis, Asia Pacific rewards consulting leader at Mercer. The performance metrics on which these bonuses are based are more equally balanced between the top and bottom line measures at Asian firms versus at Western firms which tend to place a greater emphasis on profit based metrics (83% at Western companies versus 61% at Asian firms). Asian firms also give more importance to a bonus determination process that is less formulaic and more discretionary.
While long-term Incentive (LTI) plans are more prevalent at Western Firms in Asia (63% versus 45% of Asian firms), the survey shows that more Asian firms (36%) expect to make changes in the design of their LTI plans and to increase the target pay-outs of these awards. “Asian companies are very active in the redesign and re-evaluation of their long-term incentive practices,” says Dr. Kothuis. “One of the biggest changes in the LTI landscape is the decreasing popularity of stock options which has fallen from 58% to 48%.”
Asian companies are also much more likely to pay irregular, ad hoc awards, outside of the annual grant cycle (32% of Asian companies versus 8% of Western firms), for purposes of retention, recognition and promotion. This highlights the fact that retention is one of the top three talent challenges, particularly among Asian firms that are in growth mode.
The Asia Executive Remuneration Snapshot Survey also reveals that Asian companies have an increased awareness of hot-button compensation issues and the need for more engagement and transparent communication with shareholders. “Almost half (48%) of the Asian companies surveyed indicate to us that they plan to explain the rationale for their pay decisions with greater clarity, not only the ‘what’ of compensation but also the ‘why’ and ‘how’,” added Dr. Kothuis.
About the survey
Mercer conducts the Asia Executive Remuneration Snapshot Survey (リンク ») annually. A total of 201 companies took part in the survey from across Asia. Of them, 59% were firms with Asian headquarters and 41% had headquarters in the West. The average annual revenue of participating companies was US$840 million and the average headcount stood at 1,900 employees.
About Mercer
Mercer is a global leader in human resource consulting and related services. The firm works with clients to solve their most complex human capital issues by designing and helping manage health, retirement and other benefits. Mercer’s 20,000 employees are based in more than 40 countries. Mercer is a wholly owned subsidiary of Marsh & McLennan Companies (NYSE: MMC), a global team of professional services companies offering clients advice and solutions in the areas of risk, strategy and human capital. With 52,000 employees worldwide and annual revenue exceeding $10 billion, Marsh & McLennan Companies is also the parent company of Marsh, a global leader in insurance broking and risk management; Guy Carpenter, a global leader in providing risk and reinsurance intermediary services; and Oliver Wyman, a global leader in management consulting. For more information, visit www.mercer.com. Follow Mercer on Twitter @MercerInsights
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