executive compensation benchmark report

© 2014 Towers Watson. All rights reserved.

Compensation Review

Company X

21 May 2014

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© 2014 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only.

Table of Contents

1. Introduction

2. Methodology

3. Annual Base Salary

4. Total Guaranteed Compensation

5. Target Total Compensation

6. Actual Total Compensation

7. Annual Target Total Variable Pay

8. Annual Actual Total Variable Pay

9. Pay-Mix

10. Benefits Audit

11. Key Findings & Recommendations

Appendices

A. Definition of Terms

B. Participants Organizations

C. Job Descriptions

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1. Introduction

Towers Watson has been asked to benchmark the pay of 10 senior executives at Company X against

the market and to review the internal equity of pay for job at the same level. The following

compensation items have been analyzed:

Compa-Ratio Report: The principle of the compa-ratio is to present the comparison of data against a scale. Data

exactly similar would have “100%” alignment and different data would be positioned somewhere above and below

the 100% alignment point. Towers Watson is considering the following scale:

— Below 80% and above 120%; the positioning of data is respectively WELL BELOW and WELL ABOVE the market reference

— Between 80% - 85% and 115% - 120% is when the positioning of the data is respectively BELOW and ABOVE the market reference

— Between 85% - 115% is when the positioning of data is said to be ALIGNED to the market

Annual Base Salary

Total Guaranteed Compensation

Target Total Compensation

Actual Total Compensation

Pay Mix

Annual Target Total Variable Pay

Annual Actual Total Variable Pay

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1. Introduction

4

Company X’s compensation was benchmarked against the following companies, defined from the

Towers Watson 2013 General Industry Survey

We have analyzed and summarized the benchmarking data both by individual role and by Global

Grade

Our commentary on the results takes into account the Company’s statement that its agreed

policy is to position Executive pay at the Upper Quartile (75th percentile)

The data has been extracted from our 2013 General Industry Survey ad has not been aged to current

date. In our view this provides a good basis for comparability with Company X’s current pay levels but

any review of those levels must take into account that, in general, Executive pay has increased over

the last year by about 5%.

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2. Methodology

The following 4 step process was deployed for this project:

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Data Collection

• Reviewed following key items:

• Organisation Charts

• Global Grade Evaluations

Peer Group selection

• Selection of 11 companies among the Towers Watson General Industry Survey participants

Market Data Analysis

• Compa Ratio Analysis for ABS, TGC, TTC and ATC against selected Peer Group

• Pay mix analysis

• Internal Equity analysis

Reporting

• Power Point Summary

• Excel Report of all compensation analyses

• Presentation of results and discussion

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3. Annual Base Salary

The COO Admin and COO Retail base salaries are well below the market for their roles and Global

Grade.

The Chief Information Officer’s (CIO) base salary is well below the market 75th percentile for the role

and substantially below those of his peers. It is in line with the base salary of the General Manager at

Global Grade 17

The KSA Managing Director is well above the 75th percentile of the market for his role and is in fact

well above the 90th percentile for Global Grade 18.

The GM at Global Grade 17 is below the Upper Quartile of the market for the role and well below the

market for Global Grade 17.

The GM at Global Grade 16 is well below the Upper Quartile for Global Grade 16, although in line with

the Upper Quartile for the role.

Clearly there may be some internal equity issues on base salary as between roles with Global Grades

at 20,19, and 18, particularly this is the case with the two Global Grade 20 roles and the CIO.

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3.1 Results – Company X Compa-ratio to Peer Market Annual Base Salary

The current full-time equivalent (FTE) annual base salary, including any guaranteed additional fixed payments such as holiday pay and any extra-contractual

months required by law, collective agreement or company practice. This is a fixed amount, typically paid in monthly payments.

Company X JOB ROLE

Towers

Watson

Global

Grades

Company X

Annual Base

Salary

25th

Percentile

% Ratio @

25th Perc. MEDIAN

% Ratio @

Median

75th

Percentile

% Ratio @

75th Perc.

Chief Operating/Admin. Officer 20 1,200,000 1,626,595 73.8% 1,752,000 68.5% 1,766,700 67.9%

Chief Operating Off. / Retail 20 1,212,000 1,459,745 83.0% 1,620,217 74.8% 1,757,250 69.0%

Chief Financial Officer 19 1,128,000 840,039 134.3% 1,082,166 104.2% 1,402,890 80.4%

Chief Human Resources Officer 19 1,080,000 948,712 113.8% 1,199,300 90.1% 1,270,762 85.0%

Chief Operating Off./Regional 18 1,188,000 863,037 137.7% 1,106,346 107.4% 1,222,310 97.2%

Chief Legal Officer 18 1,056,000 870,000 121.4% 1,022,500 103.3% 1,284,000 82.2%

Chief Information Officer 18 840,000 840,561 99.9% 945,150 88.9% 1,085,817 77.4%

MD Emerging Markets 18 1,020,000 565,293 180.4% 863,037 118.2% 979,656 104.1%

MD Havas 18 1,128,000 565,293 199.5% 863,037 130.7% 1,138,806 99.1%

MD UAE 18 1,116,000 550,307 202.8% 838,865 133.0% 1,059,231 105.4%

MD KSA 18 1,320,000 754,248 175.0% 756,000 174.6% 1,031,433 128.0%

General Manager 18 1,020,000 655,358 155.6% 863,037 118.2% 979,656 104.1%

General Manager 17 828,000 728,376 113.7% 780,000 106.2% 985,800 84.0%

General Manager 16 540,000 489,660 110.3% 572,460 94.3% 604,890 89.3%

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3.2 Annual Base Salary per Role

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

2,000,000

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-

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

2,000,000

Global Grade 20 Global Grade 19 Global Grade 18 Global Grade 17 Global Grade 16

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3.3 Annual Base Salary per Grade

Chief Operating/Admin. Officer (GG20)

Chief Operating Off. / Retail (GG20)

Chief Financial Officer (GG19)

Chief Human Resources Officer (GG19)

Chief Operating Off./Regional (GG18)

Chief Legal Officer (GG18)

General Manager (GG18)

Chief Information Officer (GG18)



MD Emerging Markets (GG18)

MD Havas (GG18)

MD UAE (GG18)

MD KSA (GG18)

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4. Total Guaranteed Compensation

The addition of Cash Allowances to Base Salary to form Guaranteed Compensation changes a

number of the relativities noted in regard to base salary.

The positions of the COO Admin, COO Retail, COO Regional and MD Emerging Markets deteriorate

for their roles relative to the Upper Quartile, and the Pay Mix analysis on p28 shows that their

Allowance as percentages of Total Guaranteed Compensation are below or well below market.

The CFO and CHRO improve relative to the Upper Quartile for their roles but are low against the

Upper Quartile of Global Grade 19.

The positions of the Chief Legal Officer and GM at Global Grade 16 improve relative to the Upper

Quartiles for their roles

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The sum of annual base salary and any fixed cash allowances.

Company X JOB ROLE

Towers

Watson

Global

Grades

Company X

Total

Guaranteed

Compensation

25th

Percentile

% Ratio @

25th Perc. MEDIAN

% Ratio @

Median

75th

Percentile

% Ratio @

75th Perc.



Chief Financial Officer 19 1,596,240 1,491,803 107.0% 1,651,260 96.7% 1,814,120 88.0%

Chief Human Resources

Officer 19 1,507,716 1,383,382 109.0% 1,419,700 106.2% 1,651,487 91.3%

Chief Operating Off./Regional 18 1,525,060 1,457,502 104.6% 1,516,418 100.6% 1,635,745 93.2%

Chief Legal Officer 18 1,466,876 1,157,825 126.7% 1,332,500 110.1% 1,500,100 97.8%

Chief Information Officer 18 1,210,884 1,023,370 118.3% 1,446,312 83.7% 1,534,482 78.9%

MD Emerging Markets 18 1,295,220 985,745 131.4% 1,422,633 91.0% 1,495,441 86.6%

MD Havas 18 1,485,304 971,688 152.9% 1,308,299 113.5% 1,441,239 103.1%

MD UAE 18 1,491,476 948,120 157.3% 1,457,502 102.3% 1,474,464 101.2%

MD KSA 18 1,647,604 824,248 199.9% 1,099,260 149.9% 1,428,480 115.3%

General Manager 18 1,440,000 948,120 151.9% 1,387,764 103.8% 1,474,464 97.7%

General Manager 17 1,197,000 988,380 121.1% 1,128,383 106.1% 1,326,723 90.2%

General Manager 16 849,000 744,485 114.0% 828,127 102.5% 877,017 96.8%

4.1 Results – Company X Compa-ratio to Peer Market Total Guaranteed Compensation

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0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

2,000,000

2,200,000

2,400,000

2,600,000

2,800,000

3,000,000

4.2 Total Guaranteed Compensation per Role

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*Including Education Allowance

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4.3 Total Guaranteed Compensation per Grade

-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000













MD Havas (GG18)

MD UAE (GG18)

MD KSA (GG18)

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5. Target Total Compensation

With the addition of Target annual variable pay, as shown on page 23, the COO Admin is below the

market 25th percentile for the role (as a result of Target Variable pay of only 10%) and the COO Retail

is also below the Lower Quartile for the role. Both are well below the Lower Quartile for Global Grade

20

Both the CFO and the CHRO are well below the market Upper Quartile for Global Grade 19.

The CIO and the MD Emerging markets are below or well below the market 75th percentile for their

respective roles and both below the Median for Global Grade 18

The other roles at Global Grade 18, except the MD KSA, are aligned with the market at the Upper

Quartile for their roles but below the Upper Quartile for the Global Grade.

The MD KSA is very substantially above the 75th percentile for the role but at the Upper Quartile for

Global Grade 18.

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The sum of total guaranteed compensation and target total variable pay

Company X JOB ROLE

Towers

Watson

Global

Grades

Company X

Target Total

Compensation

25th

Percentile

% Ratio @

25th Perc. MEDIAN

% Ratio @

Median

75th

Percentile

% Ratio @

75th Perc.





Officer 19 1,939,716 1,788,028 108.5% 1,975,315 98.2% 2,090,002 92.8%

Chief Operating Off./Regional 18 1,881,460 1,593,980 118.0% 1,754,540 107.2% 2,047,782 91.9%



MD Emerging Markets 18 1,601,220 1,033,771 154.9% 1,712,066 93.5% 2,034,045 78.7%

MD Havas 18 1,936,504 1,164,396 166.3% 1,669,591 116.0% 2,020,308 95.9%

MD UAE 18 1,826,276 1,164,396 166.3% 1,669,591 116.0% 1,853,332 104.5%

MD KSA 18 2,043,604 1,384,881 147.6% 1,012,810 201.8% 1,564,810 130.6%

General Manager 18 1,746,000 1,164,396 149.9% 1,669,591 104.6% 2,020,308 86.4%

General Manager 17 1,556,100 1,137,810 136.8% 1,269,070 122.6% 1,590,822 97.8%

General Manager 16 1,103,700 909,552 121.3% 1,012,186 109.0% 1,074,348 102.7%

5.1 Results – Company X Compa-ratio to Peer Market Target Total Compensation

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5.3 Target Total Compensation per Role

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

2,000,000

2,200,000

2,400,000

2,600,000

2,800,000

3,000,000

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-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000


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5.4 Target Total Compensation per Grade












MD Havas (GG18)

MD UAE (GG18)

MD KSA (GG18)

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6. Actual Total Compensation

Actual Variable pay changes the picture dramatically, especially in respect of the Chief Officer Retail

and the MD KSA.

In most cases the payment of two or three variable pay elements significantly improves the market

relativities for the Company X executives

However, it is noticeable that the CIO, and GMs at Global Grades 17 and 16 are not beneficiaries.

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The sum of total guaranteed compensation and actual total variable pay

Company X JOB ROLE

Towers

Watson

Global

Grades

Company X

Actual Total

Compensation

25th

Percentile

% Ratio @

25th Perc. MEDIAN

% Ratio @

Median

75th

Percentile

% Ratio @

75th Perc.

Chief Operating/Admin.

Officer 20 2,414,800 2,061,505 117.1% 2,263,680 106.7% 2,609,075 92.6%




Officer 19 2,081,183 1,452,128 143.3% 1,646,288 126.4% 1,694,400 122.8%

Chief Operating

Off./Regional 18 3,067,793 926,429 331.1% 1,588,045 193.2% 1,824,505 168.1%



MD Emerging Markets 18 1,769,194 948,120 186.6% 1,195,414 148.0% 1,768,130 100.1%

MD Havas 18 2,645,070 1,071,767 246.8% 1,195,414 221.3% 1,824,505 145.0%

MD UAE 18 3,826,494 1,063,707 359.7% 1,195,414 320.1% 1,862,027 205.5%

MD KSA 18 5,327,573 1,011,546 526.7% 1,053,266 505.8% 1,122,800 474.5%

General Manager 18 2,457,200 721,213 340.7% 1,195,414 205.6% 1,711,754 143.5%

General Manager 17 1,378,000 1,023,576 134.6% 1,117,996 123.3% 1,259,720 109.4%

General Manager 16 931,000 864,489 107.7% 908,405 102.5% 1,011,382 92.1%

6.1 Results – Company X Compa-ratio to Peer Market Actual Total Compensation

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6.2 Actual Total Compensation per Role

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

5,000,000

5,500,000

6,000,000

6,500,000

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-

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000


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6.3 Actual Total Compensation per Grade












MD Havas (GG18)

MD UAE (GG18)

MD KSA (GG18)

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7. Annual Target Total Variable Pay

In general, with the exception of the COO Admin, Target Variable Pay is largely in line with the market

Median policy levels that we see more widely outside the Financial Sector, even if the levels for

individual roles, as shown on page 23 following, may vary somewhat

It is difficult to understand what the justification would be for a Target annual variable of 10% for the

COO Admin, compared to 30% or 40% for other roles

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Target variable cash rewards, in the form of performance/corporate bonuses and/or sales bonus and/or sales commission

Company X JOB ROLE

Towers

Watson

Global

Grades

Company X

Annual

Bonus %

25th

Percentile

(%)

% Ratio @

25th Perc.

MEDIAN

(%)

% Ratio @

Median

75th

Percentile

(%)

% Ratio @

75th Perc.

Chief Operating/Admin. Officer 20 10.0 31.4 31.9% 34.2 29.2% 34.6 28.9%

Chief Operating Off. / Retail 20 40.0 31.4 127.4% 34.2 116.8% 34.6 115.5%

Chief Financial Officer 19 40.0 24.0 167.0% 27.0 148.1% 38.5 103.9%


Officer 19 40.0 25.0 160.0% 32.0 125.0% 45.0 88.9%

Chief Operating Off./Regional 18 30.0 17.3 173.4% 30.0 100.0% 35.0 85.7%

Chief Legal Officer 18 40.0 21.0 190.2% 29.0 137.9% 30.0 133.3%

Chief Information Officer 18 40.0 27.8 144.1% 33.0 121.2% 50.0 80.0%

MD Emerging Markets 18 30.0 22.8 131.9% 48.5 61.9% 67.0 44.8%

MD Havas 18 40.0 22.8 175.8% 48.5 82.5% 67.0 59.7%

MD UAE 18 30.0 22.8 131.9% 48.5 61.9% 67.0 44.8%

MD KSA 18 30.0 25.0 120.0% 25.0 120.0% 30.0 100.0%

General Manager 18 30.0 20.5 146.3% 30.0 100.0% 67.0 44.8%

General Manager 17 30.0 16.1 186.5% 24.2 124.2% 33.8 88.9%

General Manager 16 30.0 29.0 103.4% 32.0 93.8% 35.8 83.9%

7.1 Results – Company X Compa-ratio to Peer Market Annual Target Total Variable Pay

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8. Annual Actual Total Variable Pay

Actual total variable payments made, including Discretionary payments and profit share are generally

high and in the cases of the COO Retail, COO Regional, MD Havas, MD KSA and the MD at Global

Grade 18 are exceptionally high

Clearly this is the result of the Profit share formulae and it must be called into question whether those

formulae remain appropriate for the size of the business units now as compared with previous years

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Actual variable cash rewards, in the form of performance/corporate bonuses and/or sales bonus and/or sales commission

Company X JOB ROLE

Towers

Watson

Global

Grades

Company X

Variable Pay

25th

Percentile

% Ratio @

25th Perc. MEDIAN

% Ratio @

Median

75th

Percentile

% Ratio @

75th Perc.

Chief Operating/Admin. Officer 20 898,000 343,696 261.3% 500,000 179.6% 550,000 163.3%

Chief Operating Off. / Retail 20 4,907,663 343,696 1427.9% 500,000 981.5% 550,000 892.3%

Chief Financial Officer 19 862,817 250,858 343.9% 350,000 246.5% 366,118 235.7%


Officer 19 573,467 219,546 261.2% 247,934 231.3% 343,079 167.2%

Chief Operating Off./Regional 18 1,542,733 227,702 677.5% 326,460 472.6% 375,513 410.8%

Chief Legal Officer 18 672,283 243,188 276.4% 261,875 256.7% 350,449 191.8%

Chief Information Officer 18 320,583 250,345 128.1% 261,382 122.6% 287,649 111.4%

MD Emerging Markets 18 473,974 242,193 195.7% 284,865 166.4% 390,599 121.3%

MD Havas 18 1,159,766 242,193 478.9% 284,865 407.1% 390,599 296.9%

MD UAE 18 2,335,018 242,193 964.1% 284,865 819.7% 390,599 597.8%

MD KSA 18 3,679,969 229,018 1606.8% 231,236 1591.4% 236,726 1554.5%

General Manager 18 1,017,200 242,193 420.0% 284,865 357.1% 390,599 260.4%

General Manager 17 686,000 117,567 583.5% 165,000 415.8% 242,415 283.0%

General Manager 16 525,000 163,140 321.8% 173,807 302.1% 196,514 267.2%

8.1 Results – Company X Compa-ratio to Peer Market Annual Actual Total Variable Pay Including Discretionary Bonus

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Actual variable cash rewards, in the form of performance/corporate bonuses and/or sales bonus and/or sales commission

Company X JOB ROLE

Towers

Watson

Global

Grades

Company X

Variable Pay

25th

Percentile

% Ratio @

25th Perc. MEDIAN

% Ratio @

Median

75th

Percentile

% Ratio @

75th Perc.

Chief Operating/Admin. Officer 20 93,000 343,696 27.1% 500,000 18.6% 550,000 16.9%

Chief Operating Off. / Retail 20 4,677,663 307,435 1521.5% 344,869 1356.4% 382,304 1223.5%

Chief Financial Officer 19 326,150 250,858 130.0% 350,000 93.2% 366,118 89.1%


Officer 19 346,800 219,546 158.0% 247,934 139.9% 343,079 101.1%

Chief Operating Off./Regional 18 1,386,066 227,702 608.7% 326,460 424.6% 375,513 369.1%

Chief Legal Officer 18 338,950 243,188 139.4% 261,875 129.4% 350,449 96.7%

Chief Information Officer 18 267,250 250,345 106.8% 261,382 102.2% 287,649 92.9%

MD Emerging Markets 18 323,974 242,193 133.8% 284,865 113.7% 390,599 82.9%

MD Havas 18 1,099,766 242,193 454.1% 284,865 386.1% 390,599 281.6%

MD UAE 18 2,248,351 242,193 928.3% 284,865 789.3% 390,599 575.6%

MD KSA 18 3,679,969 229,018 1606.8% 231,236 1591.4% 236,726 1554.5%

General Manager 18 1,017,200 242,193 420.0% 284,865 357.1% 390,599 260.4%

General Manager 17 686,000 117,567 583.5% 165,000 415.8% 242,415 283.0%

General Manager 16 525,000 163,140 321.8% 173,807 302.1% 196,514 267.2%

8.2 Results – Company X Compa-ratio to Peer Market Annual Actual Total Variable Pay Excluding Discretionary Bonus

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9. Pay-Mix

Within the market we find that the relative proportions of base salary and Allowances that make up

Guaranteed Compensation mix vary from 50:50 to 80:20, and the inclusion or exclusion of Education

Allowances (which are actually a family-dependent Benefit) do not have a large material impact on

those proportions

Companies with a pay mix in which base salary represents less than 50% of Guaranteed

Compensation have tended to have this to minimise the additional cost of End-Of-Service-Benefits

The dominant pay mix is increasingly around 60:40, with more and more companies moving to a policy

of having a single amount representing what used to be the different cash allowances.

Broadly, Company X is in line with market practice although not consistent in the application of a

policy.

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Pay-Mix Ranges

Company X JOB ROLE Job Matching

Information

Company X

Annual Base

Salary

Company X

Annual

Allowances

Annual Allowances

as % of TGC

Peer Market

Practice -

Average

Positioning vs. Peer

Market

Chief Operating/Admin. Officer AAA020-20 1,200,000 316,800 21% 25% Below

Chief Operating Off. / Retail AAA020-20 1,212,000 356,500 23% 30% Well Below

Chief Financial Officer AFA000-19 1,128,000 468,240 29% 33% Aligned

Chief Human Resources Officer AHR000-19 1,080,000 427,716 28% 22% Well Above

Chief Operating Off./Regional AAA020-18 1,118,000 337,060 22% 27% Below

Chief Legal Officer ALG000-18 1,056,000 410,876 28% 24% Well Above

Chief Information Officer AIC000-18 840,000 370,884 31% 27% Aligned

MD Emerging Markets AAB000-18 1,020,000 275,220 21% 38% Well Below

MD Havas AAB000-18 1,128,000 357,304 24% 38% Well Below

MD UAE AAB000-18 1,116,000 375,476 25% 38% Well Below

MD KSA AAB000-18 1,320,000 327,604 20% 16% Well Above

General Manager AAB000-18 1,020,000 420,000 29% 38% Well Below

General Manager AAB000-17 828,000 369,000 31% 28% Aligned

General Manager AAB000-16 540,000 309,000 36% 29% Well Above

9.1 Results – Company X Compa-ratio to Peer Market Guaranteed Pay-Mix

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9.2 Results – Company X Compa-ratio to Peer Market Total compensation Pay-Mix Graphic Representation

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10. Benefits Audit Educational Allowance

30

Market Company X

Most companies provide an educational allowance to

employees with children

Typically there is a cap of 3 children

Typically these amounts are paid to employees with

children and upon receipt.

Typically this allowance kicks in at a certain level only

Values of yearly (AED)

From To

General Management 36,000 - 50,000

Middle Management 16,000 - 28,000

Professionals 15,000 - 20,000

Company X provides an educational allowance to its

executive employees

Maximum number of children reported to be 3

Typically these amounts are paid to employees with

children and upon receipt.

Typically this allowance kicks at the executive level

only

Values of yearly (AED)

Amount

Grade 20 40,000

Grade 19 40,000

Grade 18 40,000

Grade 17 35,000

Grade 16 31,000

Company X’s practices and levels of Education Allowances are in line with the market

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10.1 Benefits Audit Annual Vacation Tickets

31

Market Company X

Most companies provide vacation/home leave tickets at least

once per annum for all employee levels.

The employee and his/her family (spouse/husband and up to 3

children) would typically benefit from this allowance in most

companies.

Average Values of tickets: (AED)

From To

General Management 15,000 - 20,000

Middle Management 10,000 - 14,000

Professionals 4,500 - 7,000

Company X provides vacation/home leave tickets to its

executive employee levels.

The employee and his/her family (spouse/husband would

typically benefit from this allowance.

Values of Company X tickets: (AED)

Amount - Family Members

Chief Operating/Admin. Officer 4,583 - 0

Chief Operating Off. / Retail 2,375 - 2

Chief Financial Officer 3,870 - 2

Chief Human Resources Officer 1,493 - 2

Chief Operating Off./Regional 2,355 - 2

Chief Legal Officer 1,173 - 2

Chief Information Officer 1,440 - 2

KSA Managing Director 4,317 - 2

UAE /Emerging. Managing Director 535 - 2

Managing Director 2,375 - 2

Managing Director 2,223 – 2

The amounts given for individuals in Company X appear to be the cost of individual tickets. These

seem to be in line with market practice but it is not clear whether the potential number of tickets is in

line with market

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Market Company X

All of the participant companies provide health and

medical cover to employees at all levels and typically

to:

• Employee

• Spouse

• Children

Typical supplemental benefits may include:

• Surgery/hospitalization

• Pre- and post-hospitalization

• Full outpatient cover

• Serious illness treatment

• Maternity

Company X provides health and medical cover to

employees at the executive level and typically to:

Chief Operating/Admin. Officer - For self

Chief Operating Off. / Retail - Self + Family

Chief Financial Officer - Self + Family

Chief Human Resources Officer - Self + Family

Chief Operating Off./Regional - Self + Family

Chief Legal Officer - Self + Family

Chief Information Officer - Self + Family

KSA Managing Director - Self + Family

UAE / emerging. Managing Director - Self

Managing Director - Self + Family

Managing Director - Self + Family

10.2 Benefits Audit Medical Insurance

Company X’s medical insurance provision seems broadly in line with market practice

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11. Key Findings & Recommendations (1/2)

33

Internal Equity

Clearly there are issues about the internal equity of base salaries between roles at Global Grades

20,19 and 18, as reported on Page 6.

These internal equity issues are worsened by the results of the profit share arrangements for

Commercial roles and a reappraisal of the profit share formulae would be in order.

Guaranteed Compensation and mix

The inclusion of Education Allowances, which are a family-related Benefit, may distort the picture

slightly in regard to Guaranteed Compensation mix. Company X should consider moving to a

standard policy under which Allowances would be calculated in a fixed ratio to Base Salary.

Commercial v Support roles

Different companies follow different practices in regard to discriminating on pay between

Commercial (“Revenue Generating”) and Support roles:

— Many don’t differentiate

— Some do in regard to Total Cash pay mix, eg in Banking, with higher but potentially more variable bonus

opportunities for Revenue Generators than for Support and sometimes lower fixed pay

— Some offer lower fixed pay for Support than for Revenue Generators

Our view is that it would be appropriate to differentiate on Variable pay opportunities, rather than

fixed pay for roles at the same level, but not to the extreme extent practiced by Company X.

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11. Key Findings & Recommendations (2/2)

34

Commercial v Support roles (cont)

There is no ideal compensation mix which differentiates Commercial from Support. Each company

should address and decide on its pay philosophy to support its business strategy in order to decide

whether what its pay mix should be and if it should differentiate.

Variable pay

The provision of large amounts of discretionary bonus in addition to target bonus opportunities at

Company X is poor practice. It undermines the transparency of pay arrangements and the link

between measurable performance and reward

If the intention of the discretionary bonus is to go some way to “level’ the treatment of different

executives it would be better simply to review and increase all target bonus opportunities. In any

case the Target variable pay for the CO/Admin Officer should be changed

The excessive values of profit share payouts suggest that there is a fundamental flaw in the

calculation of those profit shares.

As support roles contribute to the health and success of the Group there is, in principle, no reason

why they should not share in the profits of the overall Group – even if it is to a lesser extent than the

Commercial roles’ shares in the profit performance of their parts of the business. Group profit share

might encourage more entrepreneurial behaviour

Company X should consider joining the gathering trend to make some part of reward long-term

performance based. This could be through bonus deferral but might more effectively be through a

dedicated long term incentive plan

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Appendix A – Definition of Terms

35

Ranges

10th Percentile: Value below which 10% of the data lie.

25th Percentile: Value below which 25% of the data lie.

Median: Value above/below which 50% of the data lie.

75th Percentile: Value above which 25% of the data lie.

90th Percentile: Value above which 10% of the data lie.

N°of Companies : Number of companies reporting incumbents taken into account in the calculations.

N°of Incumbents : Number of individual incumbents taken into account in the calculations.

Cash Components

Annual Base Salary: Includes monthly base salary multiplied by the appropriate number of months based on the country statutory requirement,

and other fixed payments (such as fixed guaranteed bonuses and contractual bonuses). Expressed as an annual amount.

Total Guaranteed Compensation: The sum of annual base salary and any fixed cash allowances.

Target Total Compensation: The sum of total guaranteed compensation and target total variable pay.

Actual Total Compensation: The sum of total guaranteed compensation and actual total variable pay.

Target Total Variable Pay: Target variable cash rewards (including profit-sharing), in the form of performance/corporate bonuses and/or sales

bonus and/or sales commission.

Actual Total Variable Pay: Actual variable cash rewards (including profit-sharing), in the form of performance/corporate bonuses and/or sales

bonus and/or sales commission.

Target Total Rewards excluding LTI: The sum of annual base salary, fixed cash allowances, target total variable pay and valued benefits.

Actual Total Rewards excluding LTI: The sum of annual base salary, fixed cash allowances, actual total variable pay and valued benefits.

Pay-Mix: The combination of various types of rewards – such as base pay, performance incentives, stock options, and benefits – that an

individual receives.

executive compensation benchmark report

Documents

towers watson client

introduction towers

executive pay

positioning of data

annual actual total

data collection

benchmarking data

comparison of data