Aligning management performance with shareholders’ interests through share structures creates greater accountability leading to better returns for all.
New ways of doing business
Covid-19 has not only propelled companies of all sizes to embrace new ways of doing business, but it also offered a unique opportunity to reposition age-old management fads like restricted share-incentives. Various initiatives are allowing for greater transparency in pay gaps across organisation in all industries, and therefore the opportunity to implement new innovative structures at executive level is now a real possibility.
When considering executive remuneration, it is important to consider all three dimensions when designing the structure to ensure that one constituent is not losing out at the expense of the other. It is time to start thinking about the new ‘Triple Bottom Line’: The Company, Existing Shareholders and Participants of the Incentives. Every constituent should benefit from these structures.
We are starting to see mandated minimum shareholding requirements for executives. Voting by shareholders on remuneration structures has also become popular and activist shareholders, specifically asset managers, pension funds and community organisations are starting to exert influence on companies to make positive changes regarding corporate governance concerns.