Dive Brief:

• Mercer’s latest Financial Services Executive Compensation Snapshot Survey shows that 78% of companies are making changes to their executive pay programs as a result of difficult market conditions.
• The survey reviewed the pay practices of 55 global financial services companies – banks, insurers and other financial services companies – based in 15 major countries in Europe, North America and Asia.
• The most popular changes planned are the strengthening of bonus-malus and clawback conditions (47%), strengthening the link between performance management and compensation (44%) and increasing the use of non-financial measures (31%) in reviewing performance.

Dive Insight:

Vicki Elliott, senior partner at Mercer, said financial services HR teams and remuneration committees are seeking ways to structure pay to engage, motivate and retain high-performing staff while being mindful of regulatory requirements and public pressure.

"Since 2008, we’ve seen a steady change in approach as companies actively tie rewards more closely to risk and multi-year performance," she says, adding that in 2015, for example, there is much focus on increasing the individual differentiation in bonuses. The four main differentiation strategies mentioned in the survey are bonus deferrals, bonus-malus and clawbacks; long-term incentive plans; non-financial performance measurement and pay mix.

In the bonus deferral area, for example, most organizations have a mandatory bonus deferral in place. Nearly all banks and almost half of all insurance companies have these plans. Interestingly, 42% of North American organizations do not have a mandatory deferral program in place. This is in stark contrast to Europe (86%), where EU regulation has been more prescriptive on the issue.