What’s the Story?

The basis of pay data selection and analysis matters. The Investment Association Principles of Remuneration 2025 now requires disclosure of the comparator companies used in setting top pay. This is a big new area of disclosure and shareholder discourse.

Comparators aside, the tools used in data analysis matter too. For example, the recent CORPGRO study of top pay at UK house builders looked at pay levels and pay mix in the context of the government drive for a step change in housing delivery. It used some non-normal tools:

• Average: arithmetic mean (not median).

• Pay maximum (not TDC)

• Money measured incentives (not percentages)

• Vector incentive typology (not metric descriptors).

Why Does it Matter?

Standard pay data tools are convenient, but not always best. Compensation professionals and Compensation Committee members understand readily the regular ground rules. In vanilla situations this is effective, but often non-standard situations are better served by fresh thinking and more precise methodology.

These are significant issues because of the impact on the outflow “market” numbers. Skewed comparator selection or wonky job match choices stream fully into the resulting figures.

For example, in the new UK house builder’s study:

• Arithmetic mean is a better look at “normal” than the middle occurring number for a bespoke small data set.

• Pay maximum is a key engagement driver, not the “competitive” level used for benchmarking.

• Potential money upside drives executive attention, not incentives expressed as percentages; and

• Incentive vectors highlight both the overall Growth / Return balance and the Social / Capital Market balance.

Each item deserves a deeper look. A joy for another day.

Pay data is presented to compensation committees annually and often much more frequently. Some use a no-change approach to avoid justification questions. In a fast-changing world this is simplistic and should be challenged.

Newspoint view

Data can be made to dance. Selective comparator choices, input assumptions and tool choices will distort the outcome either with intent, or by accident with poor corrective enthusiasm if the numbers please management.

Data is a servant not a master. The analysis terms of reference and implicit assumptions must be approached with care. Indeed, the dive into comparator selection and tool use methodology must flag use of conventional and non-standard issues clearly for decision makers.

Scope to explore flexed data outcomes by switching-up assumptions and comparators can now be delivered smoothly. In past times, clunky data interrogation made this difficult. Expect shareholders to examine the newly disclosed comparator company choices closely.

These issues aside, items which fall outside of the data footprint are by definition excluded. But that does not mean that these other things do not exist. We just happen not to be examining them. And so, intuition and inquiry is needed, a good time for NEDs to earn their fee 

Sometimes too the situation needs a gain share approach connected only distantly to conventional pay data. Compensation committees must step firmly into that uncomfortable space when the business requires that approach.

It is time for compensation committees to enliven the top pay debate by shaking up the classic pay data sandpit. Best to do that now and not wait for hostile shareholder questioning.

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Executive Compensation and Incentive Design

Please feel free to email or call:

Damian Carnell - [email protected] +44 (0) 7989 337118

VA Bec Bostock - [email protected]

Please share this CORPGRO information with your board or your colleagues.