Performance Management

Financial Performance Measures – their use in Incentive Plans

  • In Person Event
  • November 4, 2021 @ 5:00 pm - 6:30 pm UTC+0

This event is running as a hybrid event, both in-person and online.

As a follow-up to the excellent introductory session on Financial Performance Measures with Alex Edmans in July, this meeting will examine in detail the use of such measures in both annual and longer-term incentive plans.

Having now considered what is meant by corporate (and management) performance – from the perspective of different stakeholders – we now turn to the complex task facing the Remuneration Committee of how to link performance to an appropriate level of reward.

In this session, Tom Gosling, will share his learnings as a former reward consultant to major international companies – as complemented by the broader range of responsible business issues in his current role at the LBS Centre for Corporate Governance, for whom he has just completed an academic survey paper on how boards and investors set CEO pay. Tom’s views will be challenged in discussion with guest speakers representing RemCo and investor perspectives, namely George Feiger and Alan Giles, as well as the diverse experience of PARC members.

Examples of the critical areas to be covered include:

  • The different types of financial measure – and how they align with value
  • The problems of looking at individual measures in isolation
  • The relevance of different measures for either short-term or long-term plans, including those measures that show stronger correlation with long-term share price
  • The extent to which measures are subject to management control, and the tension between alignment with inputs vs alignment with shareholder value
  • Treatment of complex adjustments such as impairment charges
  • Selecting appropriate comparator peer groups
  • Discretion – when, why, and how boards should over-ride formulaic outcomes

In the aftermath of the Covid pandemic, the scrutiny placed on corporate performance and justifiable reward is probably higher than it has ever been. RemCo chairs are keenly aware of the need to drive performance improvement, while balancing the interests and sensitivities of multiple stakeholders. Being seen to ‘do the right thing’, and setting the right performance measures and targets looms large on the Board agenda.

This session will combine expert input with a facilitated discussion, drawing out the wide range of knowledge from PARC members and guests. It will provide invaluable input for those reward and HR leaders accountable for designing reward policies for the coming years.

This is the second session in our Performance Trilogy. Session 3, which will focus on ESG and other critical non-financial measures, is scheduled for our 2022 programme.

Speakers

Tom Gosling

Executive Fellow, London Business School

Tom is an Executive Fellow in the Department of Finance at LBS where he contributes to the evidence-based practice of responsible business by connecting academic research, public policy, and corporate action. He works with the Centre for Corporate Governance and the Leadership Institute at LBS. He has 20+ years experience as a board advisor. Most recently as a senior Partner at PwC where he established and led the firm’s executive pay practice, advising FTSE-100 and equivalent private and European companies on corporate governance and executive pay. Tom is also a member of the Steering Committee of The Purposeful Company, a think tank devoted to identifying ways in which the UK corporate governance environment can be developed to support companies that create profit through fulfilling a purpose that benefits society. Tom is a regular commentator in print, broadcast, and social media. He presents the Grow the Pie podcast series with Alex Edmans, Professor of Finance at London Business School, looking at the evidence base in support of responsible business. Tom has a PhD in Applied Mathematics and is a Qualified Actuary.

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George Feiger

Executive Dean of Aston Business School

George Feiger has been Executive Dean of Aston Business School since 2013. Previously he founded a wealth management firm; was Director of McKinsey in the US & UK; Global Head of Investment Banking for Warburg; Global Head of Onshore Private Banking for Swiss Bank and UBS; and involved in various venture capital activities. He was Lecturer of Economics at Harvard; and Associate Professor of Finance at the Stanford Graduate School of Business. He has a PhD in Economics from Harvard.

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Alan Giles

Chairman of The Remuneration Consultants Group and Senior Independent Director and RemCo Chair of Foxtons

Alan is Chairman of The Remuneration Consultants Group, Senior Independent Director and Remuneration Committee Chair of Foxtons plc, and a Non-Executive Director of Murray Income Trust plc. He is also an Associate Fellow of Saïd Business School, University of Oxford, and an Honorary Visiting Professor at Bayes Business School, City, University of London, where he is Deputy Chair of the Advisory Board of the Mergers & Acquisitions Research Centre.

Alan has extensive retail sector experience, having been Chairman of Fat Face from September 2006 until July 2013. Earlier in his career he formed HMV Group as Chief Executive in 1998 as a leveraged buy-out and led the Group through its London Stock Exchange IPO in 2002 before retiring from the Group in September 2006 to develop a portfolio of non-executive and teaching roles. From 1993 to 1998 he was Managing Director of Waterstone’s, having joined WH Smith Group in 1982 and being appointed to their board in November 1995. He also served as Operations and Development Director for Do It All and General Manager (Books) for WH Smith Retail. Prior to this, he spent seven years in buying and marketing roles with Boots. He was a non-executive director of Rentokil Initial plc from 2006 to 2017, Wilson Bowden plc from 2004 to 2007 and Somerfield plc from 1993 until 2004. He was also a non-executive director of The Competition & Markets Authority until March 2019, having been a non-executive director of the Office of Fair Trading from 2007.

He attended Merton College, University of Oxford, where he graduated in Physics and holds a Masters in Management degree from The Graduate School of Business, Stanford University, California. He was awarded an OBE for services to business and the UK economy in 2018.

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  • Development programmes for future reward leaders