Our Executive and non-executive remuneration 2024 survey findings
Executive remuneration remains a much-discussed topic. Investors, proxy advisors and the public domain keep a close eye on it. Their views are essential when assessing executive remuneration to understand relevant trends and developments and to assess the impact on your executive remuneration strategy.
Whether you are an executive, an investor, or a governance professional, our remuneration survey offers a concise overview of key executive remuneration issues. Furthermore it provides detailed insights into the field of executive remuneration. The survey also reviews relevant trends and developments. In the wake of regulatory changes and societal shifts, we have investigated the integration of ESG metrics into executive remuneration. Also, we pay specific attention to the pay-out levels of long-term incentive plans set during the pandemic.
This survey allows you to refine your executive remuneration strategies and align them with the current trends and developments as well as the demands for transparency and sustainability. We provide a benchmark for policy review which we hope facilitates a broad stakeholder dialogue. We hope our insights allow you to navigate the complexities of executive remuneration.
This survey examines executive remuneration across 75 Dutch listed companies, including those on the AEX, AMX, and AScX indices, based on their 2023 executive pay disclosures. It provides a comprehensive overview of the current state of executive remuneration. It also highlights trends and developments that are crucial for companies when deciding on their executive remuneration policies.
Key Findings
Chairperson fees have risen across all indices, with the AEX experiencing the highest median increase from 2022 to 2023.
The ratio of CEO base salary to chairperson fee has remained consistent across different pay levels within each index.
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Key Insights / Background
ESG Metrics and Executive Incentives
A notable trend is the increasing incorporation of Environmental, Social, and Governance (ESG) metrics into Key Performance Indicators (KPIs) for executive incentives, affecting both short-term and long-term plans.
COVID 19 impact
The analysis of Long-Term Incentive (LTI) payouts across the three Euronext indices reveals that executives are benefiting significantly from the targets and KPIs established during the COVID-19 pandemic, often achieving or even exceeding their goals. This underscores the ongoing challenge for organisations to set appropriate and effective KPIs.
Factors Influencing Executive Remuneration
Several factors affect executive compensation. Consider company size, market capitalisation, assets, revenues, and full-time equivalent employees (FTEs). The complexity of the business, industry specifics, and geographic location also play significant roles in determining compensation levels. To maintain fairness and transparency, it is recommended that companies balance external benchmarking with the consideration of a relevant labour market reference group. Aligning executive remuneration with strategic objectives and the organisation's long-term value creation is essential.
Year-on-Year Comparison
Analysis of 2023 versus 2022 data shows that CEOs in Dutch indices saw average base salary rises, with a median raise of 3% to 4% across three indices. Likewise, the Total Direct Compensation (TDC) rise was relatively uniform, with a median jump of 4% for CEOs at AEX and AMX firms, and a 7% increase for those at AScX companies. Several companies show adjustments in STI/LTI metrics, with a shift towards incorporating ESG measures. Total Shareholder Return (TSR) remains the primary LTI measure, followed by Profit/Earnings, with ESG metrics playing a supplementary role.
Non-executive remuneration
The Dutch Corporate Governance Code provides guidelines for the remuneration of supervisory board members. Emphasising that it should reflect the time and responsibilities of their roles. Shares or rights to shares should not be part of their remuneration. Transparency in how remuneration contributes to sustainable long-term value creation is also mandated.
Trends and Developments
The use of ESG metrics in executive remuneration is becoming more prevalent, reflecting the challenges in setting the right KPIs and goals. Stakeholder engagement and disclosure practices are gaining importance, especially with new regulatory requirements. Companies must ensure that variable pay performance targets are aligned with organisational goals and strategy, tailoring performance targets to specific circumstances to achieve true pay-for-performance. Transparency and clarity in performance indicators and measurement practices are critical. Rewarding failure without a performance-based explanation is no longer acceptable.
Implications of Dutch Tax Legislative Changes
Two significant changes in Dutch tax legislation are poised to impact executives. The scaling down of the 30%-ruling, a tax benefit for qualifying expatriate employees, and the introduction of a new system for taxing income from savings and investments (Box 3) based on actual rather than fictitious returns will affect executives' net income and wealth. These changes may necessitate adjustments to remuneration policies and structures.
Conclusion
As companies navigate the complexities of executive remuneration in a changing regulatory and societal landscape, the insights from the 2023 report provide valuable guidance. With the increasing emphasis on sustainability and stakeholder engagement, executive pay practices must evolve to meet higher standards of transparency and alignment with long-term value creation.
We hope you will find this report an interesting and thought-provoking read and look forward to discussing this with you in further detail. If you would like to receive a copy of the full report or have any questions, you can download it here and/or contact one of our experts.
