CGI Glass Lewis and Macquarie Securities have partnered in a joint white paper to test whether executive long term incentives lead to outperformance outcomes at Australian companies. We found that relative share price hurdles can produce lottery outcomes, but earnings and return hurdles correspond with superior outcomes.
In this white paper, we compared the long term incentive measures used by 179 companies in the S&P/ASX 200 index with those companies’ share price and financial performance over three discrete time periods dating from 2006 to 2015.
Some of the key findings of the paper include:
- Whilst the vast majority of companies (~70%) use relative TSR as an LTI performance hurdle, this measure did not produce superior share price returns.
- In contrast, companies with accounting hurdles (EPS or ROE) featured in their LTI reward design were more likely to produce superior EPS growth or ROE improvements compared to the broader sample set.
- Additionally, companies with accounting hurdles were also more likely to outperform on share price as well.
Access the Report:
We strongly encourage clients, issuers and other stakeholders to contact CGI Glass Lewis to provide feedback, input or engage with us in response to this paper. Clients of Glass Lewis can access the report one of two ways. Those with access to GlassLewis.net can find the report in the Special Reports section. Those who exclusively use our Viewpoint voting platform, please email your Client Services Manager to request the report.
Non-clients can inquire about our services or ask for more information about this Report by emailing us at CGIGL@glasslewis.com