Compensation Transparency Important Trend
That said, she also noted that compensation transparency has become an important trend that has gained traction over the past several years. “Stakeholders ranging from employees to investors and the media are just as interested in how and why compensation decisions are made as they are in the absolute dollar amounts that were paid,” she said.For that reason, the basis of many compensation decisions is predicated on the question of whether the pay package will be easy to communicate to shareholders and plan participants, Gaynor continued. “Many REITs have simplified their compensation programs by using fewer performance metrics and fewer buckets of compensation.”This year, 15 self-managed REITs received "against" say-on-pay voting recommendations, up 4% from the prior year. According to the study, ISS continues to be critical of goal setting for incentive programs by citing the rigor of performance goals as a concern at 67% of REITs with a negative ISS say-on-pay voting recommendation.From 2016 to 2017, the median actual annual incentive payout as a percent of target declined year-over-year from 129% to 123%. The percentage of REITs now using performance-based equity seems to have stabilized in the past couple years, with 83% of REITs using such programs. In 2017, 26% of REITs included a payout modifier to their performance share plan that adjust the payout based on a secondary measure, which is typically a TSR (total shareholder return) metric.
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