Case Study: 
​Incentivize and Retain Senior Executives ​to Drive Performance
Background
  • An innovative global company is expanding business in Greater China and it needs to compete with leading local peers for both business and talent. 
  • In the past few years, a significant amount of resources have been invested in the early stage of developing the new business. Now the new business is getting on track but needs to turnaround the business to ensure sustainable growth.

Objectives
  • Understand the compensation and incentives for different executive positions within the peer group to provide reference for pay review and bonus recommendations of senior executives.
  • Reviewed common long-term incentive practices among peers, strengthened long-term incentive scheme as an integral part of the total compensation package.

Process
  • ​Select the peer group based on similarity of industry background, financial scale, company size and domicile.
  • Conduct compensation benchmarking and recommend pay adjustment and bonus payout for executive positions including CEO, CFO, and other senior executives.
  • Reviewed the long-term incentive practices including the prevalence, eligibility, vehicles, size of grant, vesting schedule, run rate, overhang and performance conditions among peers. Designed the LTI plan and projected the LTI value over 4 years to assess impact on total compensation.
Relevant Links:
Illustration: Peer Group Compensation Benchmarking and Recommendations

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  • The benchmarking analysis of total cash compensation can help identify gaps in fixed pay, variable bonus as well as total compensation. This provides the direction for pay review and bonus recommendations.
  • Based on the benchmarking results and KPI achievement, Pretium will make recommendation on pay review and bonus payout.
Illustration: LTI Overview
  • Long-term incentive (“LTI”) is highly prevalent among peers in the industry and we analyze the common practices based on 7 dimensions:
         -  Eligibility: executive directors and senior executives
         -  Percentage of staff with LTI grant
         -  Grant frequency: irregular / annual basis
         -  Vehicle: stock options, restricted stocks, performance shares
         -  Annual run rate and overhang: based on percentage of fully-diluted shares
         -  Total grant
         -  Vesting
  • Below is an illustration on the annual run (grant) rate among peer companies
Illustration: Proposal on Stock Option Grant
  • Below is an illustration on stock option grant as a percentage of long-term incentive (LTI) pool and percentage of outstanding shares.
Illustration: Translating Fair Market Value into LTI Value Over 4 Years
  • Assumed fair market value of each option: XXXX (low end) and YYY (high end)
Result
  • The executive compensation benchmarking and LTI review provides valuable insights to align compensation practices with prevailing pay levels and incentive practices in the market to drive performance.