First Look at 2018 Global LTI Survey Results to Fuel Your Global Compensation Strategy

August 2, 2018 Derrick Neuhauser

As companies continue to expand internationally, the need for a comprehensive global strategy — which includes a review of long-term incentive (LTI) practices — becomes paramount. Attracting and retaining critical talent, maintaining internal equity across borders, incentivizing high performers, achieving multinational business goals, and managing equity share pools can all play a role in shaping a company’s LTI strategy.

LTI awards are typically the largest component of pay, and can therefore have the greatest impact on decision making for global management. Yet the process of determining eligibility, award size and performance measures of LTI grants can be complex and challenging to navigate.

Aon’s 2018 Global LTI Policies and Practices Survey provides insights on how multinational companies are managing global LTI programs to balance shareholder performance expectations and employee engagement. Armed with this data and knowledge, you can inform your global strategy and make decisions with confidence.

Top LTI Trends We're Discovering

While Aon’s 2018 Global LTI Policies and Practices Survey is still underway and data is still being collected, we wanted to pull back the curtain and offer our readers a preliminary review of the results.

1. Global Breakdown of Perceived Value of LTI

One of the survey’s main goals is to gauge the impact of long-term incentives on successfully advancing the global business strategy of companies around the world. Per Figures 1.1 and 1.2 below, our initial results show that LTI awards are important for both executive and managerial positions. As expected, the importance of LTIs for executives varies with global regions. Organizations overwhelmingly (98%) reported LTI in the U.S. as important or very important for motivating executive talent to achieve business results; that number is up from 95% last year.  

Figure 1.1: Perceived Value of LTI for Executive Positions

Source: Aon’s 2018 Global Long-Term Incentive Policies and Practices Survey

The results for management also varies for global regions, but the disparity is far less across global regions at the managerial level than at the executive level. Similarly, the majority of organizations (63%) report LTI in the U.S. as important or very important to motivate managerial talent to achieve business goals.

Figure 1.2: Perceived Value of LTI for Managerial Positions

Source: Aon’s 2018 Global Long-Term Incentive Policies and Practices Survey

2. Primary LTI Vehicles Used

We also leveraged the survey to understand the most prevalent awards granted by companies headquartered in the U.S. and outside the U.S. Consistent with our 2016 survey, the preliminary results indicated that the majority of companies used Restricted Stock/Restricted Stock Units (RSUs) and performance shares or performance share units (PS/PU) as the most prevalent LTI vehicles across the globe.

Figure 2: Most Prevalent LTI Awards

Source: Aon’s 2018 Global Long-Term Incentive Policies and Practices Survey

3. Measuring the Effectiveness of Global LTI Programs

Another goal of the 2018 survey was to understand how companies measure the effectiveness of their global LTI plans. This remains a challenge for many companies, as they struggle to nail down the right metrics to gauge effectiveness, a finding that’s also consistent with our 2016 survey. Though LTI programs come with a high price tag from a financial statement expense and operational compliance standpoint, the ROI is difficult to calculate. The objectives for most organizations are typically 1) talent related (i.e., attraction, retention and engagement, and 2) to further the impact of strategic business goals.

The preliminary results indicate that the “achievement of business goals” earned the most favorable assessment with 65% of companies rating their plans as effective or very effective, while only 7% rated their plans as not effective.

Figure 3

Source: Aon’s 2018 Global Long-Term Incentive Policies and Practices Survey

Next Steps

Developing competitive long-term incentive policies and practices can be complex and challenging. To help drive business success, increase employment engagement and retention, and maintain long-term performance, companies need data to help them design LTI plans that are market competitive for the regions they are in.

Click here to participate in Aon’s Global LTI Policies and Practices Survey. The deadline to participate is August 31, 2018. It will take less than 30 minutes to complete, and all participants will receive a free summary report. Contact us to learn more about the survey or let us know if you have questions about global long-term incentives that one of our global compensation consulting experts can answer.

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