A recent Outten & Golden blog notes key trends most likely to impact executive pay in 2023:
1. Increases in Base Compensation
2. Geographic Location/Remote Work
3. Retention-Based Compensation
4. P4P Requirements for Public Companies
5. Environmental, Social, and Governance (ESG) Prioritization, Integration, and Disclosure
6. Increased Pay Transparency Laws
7. Increased Executive Mobility and its effect on Executive Compensation
See the blog for more details on each trend.
I found the first one particularly interesting. In support of this trend, the blog cites Pearl Meyer survey data showing higher base pay increases and off-cycle adjustments to salaries in 2022 as well as further increases expected in 2023, and credits this phenomenon on executives’ preferences for upfront cash rather than deferred compensation or equity in light of market volatility.
On pay versus performance, the blog states:
These new disclosure requirements will undoubtedly impact executive compensation structures for NEOs and say-on-pay voting outcomes as shareholders obtain greater transparency about pay practices, pay and performance relationships, and special awards.
It’s still unclear how investors will use PVP disclosure, but I’ll hop on the bandwagon and hope that monthly vesting schedules are going the way of the dodo. I imagine many companies are reconsidering vesting schedules after going through the first year of equity adjustment calculations!
– Meredith Ervine, CompensationStandards.com, March 21, 2023