Among the performance measures commonly used by companies to guide performance-based pay are compounded annual growth rate (CAGR), total shareholder return (TSR), return on equity, and earnings per share (EPS). These benchmarks have followed an upward trajectory in recent years among both life insurers and other financial services firms—and among companies in other industries.
The “2013 CEO Compensation Report,” published by Equilar, pegs the CAGR for the financial services industry at 4.3 percent during the 2010-2012 period. The EPS and TSR percentage changes over the same time frame were +31.6 percent and +11 percent, respectively.
However, the report notes, the three-year median realizable pay among all financial services CEOs was actually below that of target pay: $22.3 million versus $24.6 million, respectively. This contrasts with other sectors, most notably the technology space, which enjoyed the largest increase of realizable pay ($24.8 million) relative to target pay ($23 million), a difference of 23.8 percent.
For the 2010 to 2012 period, equity awards included in realizable pay for all S&P 500 CEOs consisted of 43 percent performance equity, 29 percent stock options, and 28 percent time-vested stock. Equity awards for target pay consisted of 35 percent performance equity, 38 percent options, and 27 percent time-vested stock.
The report observes that a large amount (43 percent) of equity realizable by CEOs is the result of performance awards earned in 2010 to 2012. This contrasts with target pay, for which performance equity is 35 percent of total equity awards.