Reward investments into the future! With Obermatt’s indexed performance measurement, you create incentives for investment in the future and sustainable growth. Integrate ESG criteria into your remuneration system and achieve the maxim "People, Planet, Profit" with the Obermatt Triple Bottom Line.
Managers want reliable compensation that is commensurate with their performance in the market, and shareholders want transparency of performance.
With new clients, we often see that the risk for extremes in compensation payouts is surprisingly high. The probability of no payout (zero compensation, the first red bar in the graph) in the case shown was almost 22%, which is a clear retention and motivation risk. At the same time, the risk for maximum payout was almost 20%, which is a reputational risk and creates expectations that are difficult to meet (last red bar in the graph). The desirable green bars, where more performance leads to more pay, are unfortunately rather small (graph on the left). The analysis was made for large industrial companies. For non-cyclical companies, such as consumer goods, the result is almost the same. For smaller companies, the results can be even riskier.
When Obermatt improves performance measurement using the Triple Bottom Line or by indexing key figures, the risk of unwanted payouts drops while the likelihood of desired payouts rises. Thus, companies meet the reliability and transparency demanded by shareholders and enjoy broader acceptance of compensation, including internally.
37% of Swiss mid-cap companies have ESG built into management compensation.* This trend knows only one direction: Upwards.
With the Triple Bottom Line, ESG targets can also be integrated into the compensation system. This view to the future has several advantages:
Broader focus: the focus is not only on profit but also takes ESG into account. Investments in the future have a higher weighting, which leads to more motivation for growth.
More engagement: the integration of ESG goals to which managers and employees can contribute, results in broader engagement across the company.
Reliable payouts: when a higher number of targets and metrics are used as the basis for compensation, there are fewer fluctuations - and therefore fewer unpleasant surprises - in bonus payments.
* Two-thirds of SMI companies and 37% of SMIM companies have ESG built into their short-term incentive (STI). Source: Agnès Blust Consulting, 2020
Companies receive the Triple Bottom Line analysis as the basis for ESG compensation. Obermatt leads the selection of financial and ESG performance metrics, the target setting for each measure, the calibration of the compensation function and prepares the documentation of the compensation regulations. This applies to both annual compensation, STI (Short-term Incentive) and multi-year plans, LTI (Long-term Incentive).
Obermatt has been involved in the introduction of financial performance measures into compensation for over 20 years and serves approximately 44% of Swiss companies with relative performance measures. While too many companies still limit their long-term compensation plans to stock returns, Obermatt has experience with all forms of quantitative performance indicators, which have been published in award-winning books and dozens of articles, enabling its clients to design compensation more reliably. As a customer, you receive the Triple Bottom Line analysis that serves as the basis for ESG compensation. Obermatt guides the selection of the financial and ESG performance indicators, the target setting for each metric, the calibration of the compensation function and prepares the documentation of the Compensation Rules. This applies both to annual compensation, STI (short-term incentive) and multi-year plans, LTI (long-term incentive).
To help you increase the relevance of strategic non-financial performance indicators (ESG) in your company, we offer to analyze your situation free of charge. You will receive a written report on your compensation system with strengths/weaknesses analysis. CEO Dr. Hermann Stern presents the results of his analysis to you and other decision-makers in your company in an in-depth, personal dialogue and answers your questions.