LTIPS and reforming executive pay
The manner in which senior executives of large public companies are remunerated is a high-profile issue and one which is likely to become even more sensitive in the context of Coronavirus.
At a time of acute economic pressures and rising unemployment, the prospect of chief executives receiving high and excessive pay awards will undoubtedly arouse much controversy and resentment.
It is not simply the quantum of the pay award that is important. The structure of the pay package – whether it is made upon of cash, bonuses or share incentive schemes – is also vital. We have seen a distinct shift over the past few decades; in the 1970s and early 1980s, the vast majority of executive pay was made up of cash and bonuses. This steadily changed over the next thirty years to the point where in this decade the majority of executive pay is made up of long-term incentive schemes. Only a quarter of total pay consists of base salary.
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