Reward Practice

#Fairpay #KPIconsulting #IncentiveStructures #CorporateGovernance #Strategy #Transactions #ESG #RemunerationCommmittee #ShareholderEngagement #DataModelling

Overview

In an environment of constant change, the ability of organisations to demonstrate agility and adaptability is critical to their sustainability and future success. Fundamental to this success is how the organisation retains, motivates and in a way that maximises their productivity, and creates significant value for shareholders and stakeholders alike. The answer is, reward with consideration for the changing business landscape. This entails the use of reward structures and incentive plans that reflect the business strategy and ensure that it is translated into pay outcomes.

Now more than ever, companies are held to higher standards, with their approaches to reward, underlying performance conditions, and the behaviours they drive under the microscope from shareholders, regulators, the media, their employees and wider stakeholders. Understanding the impact of these evolving forces on the competitiveness of reward is increasingly difficult. Our approach is to consider the interests of all stakeholders as integral parts of the broader management ecosystem, which comprises leadership, incentivisation, influence, performance management, global mobility and business strategy.

Issues you may be facing

Are your remuneration structures for executives and senior management aligned to your shareholders and wider stakeholders’ interests?
Do you have the necessary data and analytic tools to understand the impact of your incentive structures and where you are positioned from an income disparity perspective?
Are you aware of corporate governance trends and regulatory changes and the effect these have on your variable incentive structures?
How are you aligning your remuneration structures to fair, transparent and responsible principles?
Are the performance conditions underlying your variable incentive structures linked to your business strategic objectives?
How are you integrating effective ESG metrics into your variable incentive structures?
Is your organisation undergoing corporate changes (unbundling, rights offer or an internal restructuring) and requiring assistance on how this impacts your remuneration structures?
In an evolving remuneration environment, are your non-executive directors and executive management equipped with the necessary knowledge to solve the company’s important problems and drive efficient outcomes linked to the company’s strategy?

How we can help you

Data modelling and fair pay analysis
Corporate governance, fair and responsible pay and shareholders and stakeholders interests
Designing your incentive structure
Performance conditions and ESG
Corporate activity and transactions
Trends, training and onboarding of NEDs and EDs

Data modelling and fair pay analysis

Data analytics and benchmarking
- Benchmarking forms the cornerstone in making sound and informed remuneration-related decisions for executive directors, non-executive directors and other management. We specialise in providing customised benchmarking reports focused on providing clients with appropriate comparator data that takes into account their size, complexity and relative industry factors.
Financial modelling and scenario analysis
- We develop economic cost and scenario models to assess incentive structures, affordability and value creation impact for both participants and the company. These models are typically used as a tool to support and aid the decision-making process.
Fair pay roadmap and analysis tools
- Fair and responsible pay is a journey and the first step is to know where you stand. We can assist companies in using a suite of measurement tools, both on a micro and macro basis, to determine their Gini coefficient, Palma ratio, gender and wage gap. We can also assist in establishing a fair and responsible pay roadmap to identify action steps that should be taken i.e. the development of a fair pay policy.

Corporate governance, fair and responsible pay and shareholders and stakeholders interests

Remuneration policy and remuneration report assistance
- Clear and transparent remunerations policies aligned to the strategy of a company are paramount. We can assist companies in developing their remuneration philosophy, principles, policies and frameworks that are aligned to local and global leading practices and King IV™.
Shareholder and wider stakeholder engagement
- Continuous stakeholder engagement is integral to ensure that incentive structures are both understood and aligned with shareholders’ and wider stakeholders’ interests. We can assist companies with engagement for new incentive plans, their remuneration report and post-AGM engagement.
Tax and regulatory guidance
- Understanding the net tax impact of a company’s incentive structure is critical to evaluate the benefits derived for the participants and the costs associated with the structure. This is particularly important where companies have a global footprint and specific tax and regulatory legislation applies.
Malus, clawback and MSR requirements
- Staying abreast of governance developments and risk-mitigation measures are fundamental to a company's success. We can assist companies in providing guidance including preparing the necessary recommendation and implementation documentation for both shareholders and other employees.
Market practice research and remuneration trends
- It is important that they not only consider the strategy of the company but that they also have regard to the market in which they operate and the related emerging trends. Given our broad network and expertise, we can provide details as to local and global emerging and current remuneration trends and practices.

Designing your incentive structure

Total reward strategy
- To ensure the effective delivery of a company’s strategy, it should be embedded into the total remuneration strategy. We can provide guidance to companies on creating a strong link between their business strategic objectives and remuneration objectives to reward outcomes, all of which are there to deliver value creation for all stakeholders.
Design and implementation of short-term to long-term incentive plans
- Design of incentive plans for unlisted and listed businesses based on their underlying business strategy, the growth phase of the business as well as shareholders’ expectations and leading market practice.
Bespoke incentive plans
- Within an evolving business landscape, traditional incentive structures may not drive the required behaviour and there is often a need for “out-of-the-box” schemes i.e. carried interest schemes and management buy-in plans.

Performance conditions and ESG

Performance condition consulting
- In implementing their incentive structures, companies should ensure that they identify appropriate and sustainable performance conditions linking these incentive structures to their business strategy. We can assist companies in developing appropriate frameworks to allow performance and behaviours to be meaningfully set, assessed and rewarded, and ensuring the link to the job architecture and competency framework is efficient and effective.
Performance condition calibration with reference to the setting of targets
- Setting suitable performance targets is not only critical from a good corporate governance perspective but equally as important to motivate management to deliver results that are stretching but realistically achievable. We assist companies in performing back testing and forward-looking scenario analysis to embed the principle of pay-for-performance.
Integration of ESG into remuneration strategy and performance scorecards
- ESG metrics should complement traditional financial measures, business strategy and deliver value creation for all stakeholders. We can assist companies in providing market research based on local and international best practice and through collaboration with other PwC specialist teams, establishment of an ESG strategy and the identification of appropriate ESG metrics.
Independent performance condition testing
- We can assist companies in tracking and testing company performance against the predetermined performance targets for purposes of payment/vesting in terms of their incentive structures.

Corporate activity and transactions

Transactions and deals
- As companies engage in corporate activities such as rights offers, unbundling, internal restructuring etc, the question that often arises is what the impact will be on the incentive structures. Our team specialises in helping companies to understand what is catered for in their incentive plan rules, overlaid with good corporate governance principles and market practice. This includes providing implementation support where necessary.
Initial Public Offering and corporate governance reporting assistance
- Making the decision to publicly list your company has many ramifications, one of which is the introduction of a variable incentive scheme aligned to companies listed on the JSE. This involves a comprehensive assessment of how robust and appropriate your current incentive structures are, which may include a migration to a revised incentive structure. In addition, the inclusion of your current incentive structures forms a critical part of the pre-listing statement, which we can assist with.
Communication and change management
- To manage expectations and to ensure that the desired behaviour is driven post-transaction, it is important that a company is transparent and delivers clear and effective communications for a variety of stakeholders (from shareholders through to participants of the incentive scheme). We can assist in drafting the necessary communication documents to cascade the necessary change management processes.
Stakeholder engagement on incentive structures and remuneration reporting
- In consideration of the many changes that may occur during corporate activities, it is essential that proper and detailed stakeholder engagement is conducted to ensure that the impact of the specific transaction on the incentive structures is both understood and aligned with shareholders’ and wider stakeholders’ interests. We can assist companies with shareholder and other stakeholder engagement.

Trends, training and onboarding of NEDs and EDs

Training and onboarding for non-executive directors and executive management
- Having well-versed and knowledgeable NEDs and executive directors assists in ensuring an effective and efficient decision-making process. We can assist in providing training and onboarding support for both current and new NEDs and executive management, including Heads of Reward and HR executives.
Remuneration Committee updates and CPD courses
- As a consequence of our wide-reaching network and depth of experience and knowledge, we are ideally positioned to provide Remuneration Committee members with the latest remuneration-related, governance and similar developments through roundtable discussions and CPD courses and events.
Remuneration Committee advisory and consulting services
- The Remuneration Committee plays a key role in ensuring that the corporate governance principles underpinning remuneration are effectively delivered. In our role as consultants, we can provide Remuneration Committees with a variety of services offerings, as set out in this section.

Download Reward Conference | The lenses of pay fairness roundtable

The lenses of pay fairness roundtable consists of specialists form PwC South Africa's Reward, ESG, and People Analytics teams, as well as senior partners form PwC UK's Reward team.