Thursday, August 02, 2007
[IWS] Towers Perrin: MULTINATIONAL LONG-TERM INCENTIVE PLANS MOVE TO LOCAL PRACTICES [24 July 2007]
IWS Documented News Service
_______________________________
Institute for Workplace Studies----------------- Professor Samuel B. Bacharach
School of Industrial & Labor Relations-------- Director, Institute for Workplace Studies
Cornell University
16 East 34th Street, 4th floor---------------------- Stuart Basefsky
New York, NY 10016 -------------------------------Director, IWS News Bureau
________________________________________________________________________
Towers Perrin
U.S. Multinationals Show Significant Changes in Participation in Long-Term Incentive Programs, Towers Perrin Survey Finds [24 July 2007]
Companies With Long-Term Incentive Programs Continue to Revise Awards for Non-U.S. Executives to Remain Globally Competitive
http://www.towersperrin.com/tp/jsp/hrservices_webcache_html.jsp?webc=HR_Services/United_States/Press_Releases/2007/20070724/2007_07_24.htm&selected=press&language_code=global
STAMFORD, CT, JULY 24, 2007 -- In a dramatic shift in total compensation strategy, many U.S. companies are significantly decreasing the size of their equity awards to executives outside the U.S. Only 24% of companies expect in the near future to grant the same number of shares to both U.S. and non-U.S. employees at the same level in the organization, abandoning a once-predominant practice, according to Towers Perrin's 2007 Global Long-Term Incentive Policies Survey. Instead of "one size fits all," companies are differentiating long-term incentive (LTI) award sizes by geography and tying awards closer to local-country practices.
The survey, which included responses from 61 U.S. multinationals across a variety of industries with median revenues of $21 billion, also found that companies are looking to decrease stock option and restricted stock awards, and instead focus on other types of performance-related plans, such as performance shares. Moreover, Towers Perrin found that more than a quarter have reduced LTI participation levels and more than a third plan to either reduce or further reduce future participation levels.
"We continue to see a significant shift in the direction of U.S. multinationals' use of long-term incentive programs worldwide," said James Matthews, principal and head of the compensation unit of Towers Perrin's Global Consulting Group. "With the expensing of stock options and greater shareholder pressure, companies are focusing on the cost of equity and being more careful about how much they distribute. The old approach -- exporting U.S. award sizes to executives around the world -- was very attractive to non-American executives, given that non-U.S. companies did not offer such generous rewards. But in today's more cost-conscious environment, this approach is hard to defend."
Global Shift in Award Levels Continues
Although the survey finds that most companies still apply the same LTI plan design around the world, a majority of companies now differentiate award sizes to participants based on geography instead of the traditional U.S. model of exporting U.S. levels of stock options across all regions. In fact, 42% of respondents now differentiate awards by geography, up from 39% in 2005, and up dramatically from only 5% in 2001. In another variation, a further 11% provide awards with a value that represents a consistent percentage of salary globally and, given that salaries vary by geography (often lower outside the U.S.), so will award sizes.
"The 37 percentage point spike over six years clearly shows that U.S. multinationals are finding more value and consistency in granting awards tied more closely to regional market levels," said Matthews. "It's actually a shift toward an approach Europeans have found highly successful in global markets. Organizations still seek to establish a consistent global policy, but they are implementing that policy in a more differentiated and customized way in each region or country, taking into account local practices and regulations."
Awards Customized Globally
The survey found that among those companies that customize awards geographically, only a minority (13%) have separate award-size guidelines for each country. Most companies group countries into regions or "tiers" by clustering countries with similar competitive values and provide common LTI award levels for that group:
* 35% establish separate guidelines by region.
* 22% create separate guidelines by tier.
* 26% create separate guidelines by both region and tier.
Often, award sizes to non-U.S. employees are set as a percentage of the U.S. award size. Median policy award sizes are:
* Europe -- 80% of the U.S. award size (versus 71% in 2005)
* Asia -- 60% of the U.S. award size
* Remainder of the world -- 60% of the U.S. award size (versus 55% in 2005).
About the Survey
The third study of its kind over six years, Towers Perrin's 2007 Global Long-Term Incentive Policies Survey was designed to determine the extent to which global companies have modified, or intend to modify, their worldwide LTI grant policies. In the first quarter of 2007, Towers Perrin surveyed 61 U.S. multinational corporations with median revenues of $21 billion and included more than a quarter of the Fortune 100 companies.
______________________________
This information is provided to subscribers, friends, faculty, students and alumni of the School of Industrial & Labor Relations (ILR). It is a service of the Institute for Workplace Studies (IWS) in New York City. Stuart Basefsky is responsible for the selection of the contents which is intended to keep researchers, companies, workers, and governments aware of the latest information related to ILR disciplines as it becomes available for the purposes of research, understanding and debate. The content does not reflect the opinions or positions of Cornell University, the School of Industrial & Labor Relations, or that of Mr. Basefsky and should not be construed as such. The service is unique in that it provides the original source documentation, via links, behind the news and research of the day. Use of the information provided is unrestricted. However, it is requested that users acknowledge that the information was found via the IWS Documented News Service.
Stuart Basefsky
Director, IWS News Bureau
Institute for Workplace Studies
Cornell/ILR School
16 E. 34th Street, 4th Floor
New York, NY 10016
Telephone: (607) 255-2703
Fax: (607) 255-9641
E-mail: smb6@cornell.edu
****************************************
_______________________________
Institute for Workplace Studies----------------- Professor Samuel B. Bacharach
School of Industrial & Labor Relations-------- Director, Institute for Workplace Studies
Cornell University
16 East 34th Street, 4th floor---------------------- Stuart Basefsky
New York, NY 10016 -------------------------------Director, IWS News Bureau
________________________________________________________________________
Towers Perrin
U.S. Multinationals Show Significant Changes in Participation in Long-Term Incentive Programs, Towers Perrin Survey Finds [24 July 2007]
Companies With Long-Term Incentive Programs Continue to Revise Awards for Non-U.S. Executives to Remain Globally Competitive
http://www.towersperrin.com/tp/jsp/hrservices_webcache_html.jsp?webc=HR_Services/United_States/Press_Releases/2007/20070724/2007_07_24.htm&selected=press&language_code=global
STAMFORD, CT, JULY 24, 2007 -- In a dramatic shift in total compensation strategy, many U.S. companies are significantly decreasing the size of their equity awards to executives outside the U.S. Only 24% of companies expect in the near future to grant the same number of shares to both U.S. and non-U.S. employees at the same level in the organization, abandoning a once-predominant practice, according to Towers Perrin's 2007 Global Long-Term Incentive Policies Survey. Instead of "one size fits all," companies are differentiating long-term incentive (LTI) award sizes by geography and tying awards closer to local-country practices.
The survey, which included responses from 61 U.S. multinationals across a variety of industries with median revenues of $21 billion, also found that companies are looking to decrease stock option and restricted stock awards, and instead focus on other types of performance-related plans, such as performance shares. Moreover, Towers Perrin found that more than a quarter have reduced LTI participation levels and more than a third plan to either reduce or further reduce future participation levels.
"We continue to see a significant shift in the direction of U.S. multinationals' use of long-term incentive programs worldwide," said James Matthews, principal and head of the compensation unit of Towers Perrin's Global Consulting Group. "With the expensing of stock options and greater shareholder pressure, companies are focusing on the cost of equity and being more careful about how much they distribute. The old approach -- exporting U.S. award sizes to executives around the world -- was very attractive to non-American executives, given that non-U.S. companies did not offer such generous rewards. But in today's more cost-conscious environment, this approach is hard to defend."
Global Shift in Award Levels Continues
Although the survey finds that most companies still apply the same LTI plan design around the world, a majority of companies now differentiate award sizes to participants based on geography instead of the traditional U.S. model of exporting U.S. levels of stock options across all regions. In fact, 42% of respondents now differentiate awards by geography, up from 39% in 2005, and up dramatically from only 5% in 2001. In another variation, a further 11% provide awards with a value that represents a consistent percentage of salary globally and, given that salaries vary by geography (often lower outside the U.S.), so will award sizes.
"The 37 percentage point spike over six years clearly shows that U.S. multinationals are finding more value and consistency in granting awards tied more closely to regional market levels," said Matthews. "It's actually a shift toward an approach Europeans have found highly successful in global markets. Organizations still seek to establish a consistent global policy, but they are implementing that policy in a more differentiated and customized way in each region or country, taking into account local practices and regulations."
Awards Customized Globally
The survey found that among those companies that customize awards geographically, only a minority (13%) have separate award-size guidelines for each country. Most companies group countries into regions or "tiers" by clustering countries with similar competitive values and provide common LTI award levels for that group:
* 35% establish separate guidelines by region.
* 22% create separate guidelines by tier.
* 26% create separate guidelines by both region and tier.
Often, award sizes to non-U.S. employees are set as a percentage of the U.S. award size. Median policy award sizes are:
* Europe -- 80% of the U.S. award size (versus 71% in 2005)
* Asia -- 60% of the U.S. award size
* Remainder of the world -- 60% of the U.S. award size (versus 55% in 2005).
About the Survey
The third study of its kind over six years, Towers Perrin's 2007 Global Long-Term Incentive Policies Survey was designed to determine the extent to which global companies have modified, or intend to modify, their worldwide LTI grant policies. In the first quarter of 2007, Towers Perrin surveyed 61 U.S. multinational corporations with median revenues of $21 billion and included more than a quarter of the Fortune 100 companies.
______________________________
This information is provided to subscribers, friends, faculty, students and alumni of the School of Industrial & Labor Relations (ILR). It is a service of the Institute for Workplace Studies (IWS) in New York City. Stuart Basefsky is responsible for the selection of the contents which is intended to keep researchers, companies, workers, and governments aware of the latest information related to ILR disciplines as it becomes available for the purposes of research, understanding and debate. The content does not reflect the opinions or positions of Cornell University, the School of Industrial & Labor Relations, or that of Mr. Basefsky and should not be construed as such. The service is unique in that it provides the original source documentation, via links, behind the news and research of the day. Use of the information provided is unrestricted. However, it is requested that users acknowledge that the information was found via the IWS Documented News Service.
Stuart Basefsky
Director, IWS News Bureau
Institute for Workplace Studies
Cornell/ILR School
16 E. 34th Street, 4th Floor
New York, NY 10016
Telephone: (607) 255-2703
Fax: (607) 255-9641
E-mail: smb6@cornell.edu
****************************************
# posted by SBasefsky : 12:36 PM
