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Rediff.com  » Business » US executives may get pay hike this year

US executives may get pay hike this year

Source: PTI
August 02, 2010 18:16 IST
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Executive compensation packages in large and midsized US companies are expected to see a rise this year, after declining over the last two years, global professional services firm Towers Watson said.

According to a survey by the firm, most companies are planning to fine-tune their executive pay programmes to further tighten the link between pay and performance as well as address growing concerns over executive retention.

The exorbitant executive compensation package had come under public criticism in the wake of the financial meltdown, which had been attributed by many to the excessive risk-taking ways of financial institutions.

Nearly half (49 per cent) of 251 US companies surveyed expect to increase funding for annual bonuses for executives this year, while 33 per cent have either made or expect to make larger long-term incentive grants (dollar-wise) this year against the last one, the survey revealed.

However, the survey suggested that most companies remain cautious about spending. About 53 per cent of the companies that are increasing bonus funding project relatively modest increases of 20 per cent or less.

More than two-thirds (69 per cent) of the companies making larger long-term incentive grants said the dollar value of their grants would increase by 20 per cent or less.

"For many companies, the economic recovery brings improved financial performance and greater flexibility to pay larger annual bonuses and long-term incentives grants," Towers Watson head (executive compensation consulting) Doug Friske said.

"However, the survey findings also reflect the unevenness of the recovery and underscore the fact that many companies continue to struggle to regain momentum in a challenging environment," he added.

The survey also found that firms were paying much more attention to executive retention issues during the economic recovery, with only one in 10 companies reporting that executive retention was not an issue for it.

However, relatively few firms are making significant changes to other executive pay elements that could heighten retention risks, including employment agreements, golden parachutes, executive retirement plans and other non-performance-based compensation.

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