MERCER GLOBAL FINANCIAL SERVICES EXECUTIVE … · Mercer Global Financial Services Executive Compensation Snapshot Survey December 2015 party for any decision made or action taken

MERCER GLOBAL FINANCIAL SERVICES EXECUTIVE COMPENSATION SNAPSHOT SURVEY DECEMBER 2015

Mercer Global Financial Services Executive Compensation Snapshot Survey

December 2015

Contents

1. OVERVIEW .......................................................................................................................................... 3

1.1. About the Survey ............................................................................................................................. 3

1.2. Definitions ........................................................................................................................................ 3

1.3. Confidentiality .................................................................................................................................. 3

1.4. If You Have Questions ..................................................................................................................... 4

1.5. Commentary on Survey Results ...................................................................................................... 4

2. PARTICIPANT LIST AND PROFILE .................................................................................................... 7

2.1. Participant Profile ............................................................................................................................. 7

3. PROJECTED 2016 BASE SALARY AND ANNUAL INCENTIVE MOVEMENTS .................................. 9

3.1. Projected/Forecasted 2016 Base Salary Increases .......................................................................... 9

3.2. Projected/Forecasted 2016 Base Salary Increases by Region ....................................................... 17

3.3. Predicted Change in 2016 Actual Incentives (for 2015 Performance) ............................................ 20

3.4. Projected Change in 2016 Target Incentives ................................................................................. 28

3.5. Predicted Change in the Overall Actual and Target Corporate Incentive Pool Compared to Prior Year ............................................................................................................................................... 36

4. CHANGES TO ANNUAL AND MULTI-YEAR INCENTIVE DESIGNS AND PAY MIX ......................... 39

4.1. Planned Changes to Corporate Annual Incentive Design for 2016 ................................................. 39

4.1.1. Planned Changes to Allocation of Annual Incentives to Individuals .......................................... 42

4.2. Planned Changes in the Mandatory Deferral Design for 2016........................................................ 43

4.2.1. Prevalence of Mandatory Deferral Programs ........................................................................... 43

4.2.2. Planned Changes to Mandatory Deferral Design for 2016 ....................................................... 44

4.2.3. Changes Planned to Vehicle Mix of Mandatory Deferral for 2016 ............................................ 47

4.3. Planned Changes to Forward-looking Long-term Incentive Design for 2016 .................................. 48

4.3.1. Prevalence of Forward-looking Long-term Incentive Programs ................................................ 48

4.3.2. Planned Changes to Forward-looking Long-term Incentive Design for 2016 ............................ 49

4.3.3. Planned Changes to Vehicle Mix of Forward-looking Incentives for 2016 ................................. 53

4.4. Planned Changes to Pay Mix for 2016 ........................................................................................... 54

5. CONTROL FUNCTIONS AND FOSTERING A SOUND RISK CULTURE .......................................... 58

5.1. Effect of Regulations on Control Functions .................................................................................... 58

5.2. Steps Undertaken towards Fostering a Sound Risk Culture ........................................................... 61

6. IMPACT OF THE RATIO CAPS ......................................................................................................... 64

6.1. Impact of Ratio Caps on Pay Levels .............................................................................................. 64

6.2. Impact of the Ratio Caps on Amounts Deferred over Time ............................................................ 66

6.3. Impact of the Ratio Caps on Firm Staffing Levels .......................................................................... 67

6.4. Impact of the Ratio Caps on Firm Compensation and Benefits Costs ............................................ 67

7. ROLE BASED ALLOWANCES ........................................................................................................... 69

7.1. Prevalence of Role-based Allowances ........................................................................................... 69


December 2015

7.2. Prevalence of Changes Planned to Role-Based Allowances Design .............................................. 70

7.3. Changes Planned to Role-Based Allowances Design .................................................................... 71

Mercer Global Financial Services Executive Compensation Snapshot Survey December 2015

1. OVERVIEW

1.1. About the Survey Mercer is pleased to present the results for the eleventh edition of the Mercer Global Financial Services Executive Compensation Snapshot Survey, conducted over October and November 2015. This report provides an update on key changes and practices in corporate level compensation programs. The survey was completed by 71 financial services organizations, of which 52% were banks, 34% insurance companies, and 14% investment management and others. Survey participants are based in 20 different countries with 53% in Europe, 37% in North America, and 10% in Growth Markets (which combines Asia and South America). A list of the organizations submitting their data is included in Section 2. The next four sections cover questions on projected salary increases and predicted bonus pool movements, as well as changes in annual, deferred and long-term incentives, pay mix, role-based allowances and the latest on control functions and fostering a sound risk culture.

1.2. Definitions Clawback – already vested compensation is reclaimed based on restatement, gross negligence, non-compliance or other malfeasance. Forward-looking long-term incentives (LTI) – programs that grant long-term incentive awards for rewarding future success in addition to the short-term incentive award; an LTI award generally vests based on performance over a multi-year time frame going forward (for example, with a 2015 grant, performance criteria are set for 2019 achievement and payout). Malus – any adjustment in the unvested deferred compensation in the subsequent or current year, based on performance. Mandatory deferral – programs that have a portion of the short-term incentive award deferred over time with potential inclusion of performance-based vesting criteria which considers how business results in an award year develop over a multi-year period (for example, performance of 2015 will be re-evaluated in 2018). Material risk-taking positions – as defined by the organization, staff members whose professional activities – either individually or collectively, as a member of a group/unit/department – can exert influence on the institution’s risk profile. Includes MRTs, covered employees and identified staff.

1.3. Confidentiality To ensure the confidentiality of all data, a minimum number of observations are required in order for statistics to be displayed. Three organizations must report at least three observations for a variable in order for the mean and frequency distribution to be displayed. Four organizations and four observations are required for display of the median. Five organizations reporting at least five observations are required to display 25th and 75th percentiles. Where there has been insufficient data for analysis, this has been indicated with “--”. The information and data contained in this report are for information purposes only and are not intended nor implied to be a substitute for professional advice. In no event will Mercer be liable to you or to any third

© 2015 Mercer LLC December

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party for any decision made or action taken in reliance of the results obtained through the use of the information and/or data contained or provided herein.

1.4. If You Have Questions If you have questions regarding the survey or the report, contact us at: Vicki Elliott Dirk Vink Email: [email protected] Email: [email protected] Phone: +1 212 3457663 Phone: +1 212 3457623

1.5. Commentary on Survey Results Mercer conducted an online survey in October/November 2015. In this brief survey, we focused on projected salary increases and predicted bonus pool movements, as well as changes in annual, deferred and long-term incentives, pay mix, role-based allowances and the latest on control functions and fostering a sound risk culture. Projected/Forecasted 2016 Base Salary Increases The 2016 projected base salary increases are modest. On average, 2016 base salary increases for all roles are expected to be between 2.0% and 2.7%. The investment banking line of business is projecting the highest average increases, 2.7%. At the lower end, the average 2016 base salary increase for senior corporate management is 2.0%. The 2016 average base salary increases for all executives (excluding zeros) are expected to be between 2.3% and 3.1%. Organizations vary base salary increases significantly by region. Overall, Latin and South America and Asia are projecting higher average salary increases (4.3%) than any other regions for 2016. In particular, North America and Europe are forecasting lower average salary increases, 2.4% and 2.3% respectively. The banking industry is generally projecting slightly lower salary increases than the insurance industry and investment management and others. In particular, average increases for senior corporate management in banks are lower (1.9%) than in the insurance industry (2.2%). Average increases in European banking and insurance lines of business are generally 0.2% to 1% lower than in North America, whereas increases for the equities and fixed income lines of business are more similar. Predicted Change in 2016 Actual Incentives The majority of organizations predict 2016 annual incentive levels to be similar to 2015. However, more organizations expect annual incentive levels to decrease from last year than increase. Higher 2016 actual incentives are expected to be most prevalent in investment banking roles (20% of organizations) and equities (18%). Only 5% of organizations indicated they were expecting significantly higher 2016 actual incentives. Lower 2016 actual incentives are expected to be most prevalent in fixed-income and equities positions (31% of organizations indicated lower or significantly lower). Generally, North America has the highest proportion of firms that are predicting lower annual incentives than last year. Some European organizations predict that annual incentive levels will be lower in senior corporate management and in the control functions. Thirty percent of the insurance organizations predict 2016 annual incentive levels for their senior corporate management to be (significantly) lower, compared to 25% in banks. Projected Change in 2016 Target Incentives Generally, over three-fourths of the organizations are not planning to change their target annual incentive levels for 2016. While some European companies are planning to raise target annual incentive levels, with the private equity, equities, and investment banking lines of business being the most affected. In North America, nearly all organizations are forecasting similar 2016 target annual incentive levels.


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Planned Changes to Corporate Annual Incentive Design Most organizations are not planning to make changes to their incentive design in 2016. Although prevalent in both regions, more European organizations (35% of organizations) are planning to increase individual differentiation in bonus distribution, than in North America (27%). European organizations cite the increased weight of non-financial performance measures and use of risk-adjusted measures at business and individual levels more frequently than their North American counterparts. Fourteen percent of European organizations are planning to decrease the bonus/incentive eligibility while none in North America are considering this. Significant differences exist between the insurance and banking industry. Nearly 40% of insurance organizations want to increase individual differentiation in bonus distribution, compared to 26% in banking. Banks cite the increased use of risk-adjusted measures at business and individual levels more frequently than insurers. More insurance firms are planning changes to the use of discretion (13% increase the use, and 13% decrease it). Planned Changes to Mandatory Deferral Design Nearly all banks and around 42% of insurance firms have a mandatory deferral mechanism in place. Half of the North American organizations have a mandatory deferral program in place, and the vast majority (87%) in Europe. Organizations are generally not planning to introduce mandatory deferrals in 2016. Only a few organizations are planning to make changes to their mandatory deferral program design, particularly insurance organizations. However, approximately 20% of European and North American organizations are planning to increase eligibility for mandatory deferral. Almost one quarter (24%) of European organizations plan to increase the mandatory deferral period, whereas only 7% of North American organizations are planning this. Fourteen percent of organizations in North America are increasing the mandatory deferred portion of bonus, compared to only 6% in Europe. Very few organizations are planning to change the vehicle mix of mandatory deferrals for 2016. Nearly 10% of European organizations are planning to increase performance shares. Some insurers (12%) are planning to decrease the weight of service-based restricted stock and stock options. Planned Changes to Forward-looking Long-term Incentive Design The majority of organizations have a forward-looking long-term incentive plan in place, particularly insurance firms with 88%. Around 41% of banking organizations do not have a forward-looking long-term incentive program in place. Forward-looking long-term incentive plans are more prevalent in North America (85%) than in Europe (61%). Organizations are generally not planning to introduce forward-looking long-term incentive plans in 2016. Although changes to forward-looking long-term incentive plans are not prevalent, increasing the eligibility is more common in Europe and Growth Markets at 17% and 20% compared to less than 5% in North America. Thirteen percent of North American organizations are considering decreasing eligibility. More organizations in North America plan to increase the use of clawbacks (18%) and the rigor of performance conditions (17%), compared to Europe (4% and 8% respectively). Some differences are observed by industry. Around 10% of banking organizations plan on increasing performance/vesting period and additional required holding period (after vesting period) in their forward-looking incentive plans, whereas none of the insurers are planning this. The large majority of organizations are not planning to change the vehicle mix in multi-year awards for 2016.


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Planned Changes to Pay Mix for 2016 The majority of organizations are not planning to make changes to their pay mix in 2016. Thirteen percent of organizations (and 21% of European organizations) are increasing the weight of their base salaries. In addition, 10% of organizations are increasing the weight of role-based allowances (14% in Europe and Growth Markets). Nine percent of organizations are increasing the weight of mandatory deferrals. Changes to the pay mix are more prevalent in the banking industry than in the insurance industry. Banks are generally increasing the weight of base salaries and role-based allowances. Changes to the weight of forward-looking long-term incentives are mixed: 6% of banks are increasing the weight and 6% are decreasing the weight, while 8% of insurers are increasing their weight in the pay mix. Effect of Regulations on Control Functions Across all regions and industries fixed pay levels are increasing for control functions (41% of organizations) while variable pay levels are decreasing (31% of organizations). In the European market, organizations (46%) are increasing their fixed pay levels and their pay linkages to function performance (28%) while decreasing pay linkages to company/business performance (31%). In North America, the regulations are causing the organizations to see a decrease in the ease of attraction and retention as well as in variable pay levels. Across the different industries the regulations on control functions are affecting the total compensation levels; banking and investment management and other industries are increasing (in 19% and 30% of organizations respectively). Steps Undertaken towards Fostering a Sound Risk Culture To create a sound risk culture a majority of the organizations are focusing on setting the right tone at the top of the organization (88%), penalizing misconduct and/or non-compliance behavior (93%), and utilizing the role of risk management in performance expectation setting and evaluation (89%). Rewarding positive risk behaviors and alignment of deferrals and risk time horizons are more prevalent in banking than insurance. Impact of Ratio Caps Across all regions and industries ratio caps have increased fixed pay levels from +5% to +15% for 42% of organizations. Conversely, 58% of organizations have decreased their variable pay levels, with 36% of the population keeping similar variable levels before the use of ratio caps on pay levels. Total compensation levels are expected to stay the same as before the ratio caps were applied. Across all regions and industries deferred amounts have stayed similar (64%) or decreased (30%). Deferral levels have remained more similar in Europe while in North America they have decreased more. Staffing levels have not been impacted due to the ratio caps, with 94% of organizations reporting similar levels. Ratio caps are not affecting organizations’ compensation and benefits costs for the most part. If compensation and benefits are being affected, they are only slightly lower or higher than pre-cap levels across all industries and regions. Role-based Allowances Over 57% of banking organizations have role-based allowances in place for 2015 and an additional 6% are planning to introduce them. Very few organizations that implemented role-based allowances are now planning to eliminate them (4%) across all regions and industries. The insurance organizations generally do not have role-based allowances in place and have no plans to introduce in the future. Approximately one-fourth of the banking organizations are making changes to their role-based allowance program design. Those organizations that are planning to make changes are primarily shifting from role-based allowance to ordinary base salary (38%), decreasing eligibility for role-based allowances (23%), unifying level/amount for MRTs with the same role (23%), and changing the vehicle from equity to cash (23%). The changes are being driven by banking organizations in Europe.


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December 2015

2. PARTICIPANT LIST AND PROFILE

2.1. Participant Profile

The survey was completed by 71 financial services organizations, of which 52% were banks, 34% were insurance companies, and 14% were investment management and others. Survey participants are based in 20 different countries with 53% in Europe, 37% in North America, and 10% in Growth Markets (which combines Asia and South America). Organization nationality

Country Percentage of Organizations

United States 25%

Canada 8%

Switzerland 8%

United Kingdom 8%

France 7%

Italy 6%

Hong Kong 4%

Netherlands 4%

Spain 4%

Austria 3%

Bermuda 3%

Germany 3%

Ireland 3%

Singapore 3%

Sweden 3%

Andorra 1%

Brazil 1%

China 1%

Denmark 1%

Norway 1%

No. of Responses 71 Note: The total may not equal 100% due to rounding. Investment Management and Others: e.g., payments, stock exchange, consumer finance.


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Industry and Region Regional Profile by Industry

Banking Insurance Investment Management and Others

No. of Responses

Overall 52% 34% 14% 71 Europe 68% 26% 5% 38 North America 31% 46% 23% 26 Growth Markets 43% 29% 29% 7 Note: The total may not equal 100% due to rounding. Investment Management and Others: e.g., payments, stock exchange, consumer finance.

Industry Profile by Region

Europe North America

Growth Markets No. of Responses

Overall 53% 37% 10% 71 Banking 70% 22% 8% 37 Insurance 42% 50% 8% 24 Investment Management and Others

20% 60% 20% 10

Note: The total may not equal 100% due to rounding. Investment Management and Others: e.g., payments, stock exchange, consumer finance.

Number of employees Percentage of Organizations

Less than 3,000 17%

3,000 – 14,999 18%

15,000 – 49,999 21%

50,000 or More 44%

No. of Responses 71


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3. PROJECTED 2016 BASE SALARY AND ANNUAL INCENTIVE MOVEMENTS

3.1. Projected/Forecasted 2016 Base Salary Increases All regions and industries Across all lines of business in the global financial services industry, the 2016 projected base salary increases are modest. On average, 2016 base salary increases for all roles are expected to be between 2.0% and 2.7%. The investment banking line of business is projecting the highest average increases, 2.7%. At the lower end, the average 2016 base salary increase for senior corporate management is 2.0%. The 2016 average base salary increases for all Executives (excluding zeros) are expected to be between 2.3% and 3.1%. Again, the investment banking line of business is projecting the highest increases at 3.1%. The average 2016 base salary increase (excluding zeros) for senior corporate management is 2.5%. In the life and property & casualty industry the average 2016 base salary increases (excluding zeros) are 2.7%.

0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5%

Senior Corporate Management

Control Functions

Staff Positions

Commercial Banking

Retail Banking

Investment Banking

Equities

Fixed-Income

Asset Management

Private Banking/High Net Worth

Private Equity

Property & Casualty Insurance

Life Insurance


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Projected/Forecasted 2016 Base Salary Increases

25th Percentile

Average Median 75th Percentile

No. of Responses

Senior Corporate Management 1.0% 2.0% 2.0% 3.0% 54 Control Functions 2.0% 2.6% 2.5% 3.0% 60 Staff Positions 1.5% 2.4% 2.5% 3.0% 55 Commercial Banking 1.5% 2.2% 2.0% 3.0% 31 Retail Banking 1.1% 2.1% 2.0% 3.0% 32 Investment Banking 1.5% 2.7% 2.5% 3.0% 35 Equities 1.6% 2.6% 2.5% 3.0% 40 Fixed-Income 2.0% 2.5% 2.4% 3.0% 41 Asset Management 2.0% 2.5% 2.5% 3.0% 43 Private Banking/High Net Worth 1.5% 2.3% 2.0% 3.0% 35 Private Equity 2.0% 2.5% 2.4% 3.0% 28 Property & Casualty Insurance 1.9% 2.5% 2.5% 3.0% 30 Life Insurance 1.5% 2.4% 2.5% 3.0% 33 Based on all responses


25th Percentile


No. of Responses

Senior Corporate Management 2.0% 2.5% 2.5% 3.0% 43 Control Functions 2.0% 2.8% 2.5% 3.0% 55 Staff Positions 2.0% 2.6% 2.5% 3.0% 51 Commercial Banking 2.0% 2.4% 2.1% 3.0% 28 Retail Banking 1.6% 2.3% 2.0% 3.0% 29 Investment Banking 2.0% 3.1% 2.5% 3.0% 31 Equities 2.0% 2.9% 2.8% 3.0% 35 Fixed-Income 2.0% 2.8% 2.5% 3.0% 37 Asset Management 2.0% 2.7% 2.5% 3.0% 40 Private Banking/High Net Worth 2.0% 2.5% 2.1% 3.0% 32 Private Equity 2.0% 2.7% 2.6% 3.0% 26 Property & Casualty Insurance 2.0% 2.7% 2.5% 3.0% 27 Life Insurance 2.0% 2.7% 2.5% 3.0% 30 Based on positive responses (excluding zeros)

By region Forecasted base salary increases are highest for Growth Markets and lowest in Europe. Generally, 2016 average salary increases are expected to be between 4.3% and 6.9% in Growth Markets, 1.9% and 2.7% in North America, and 1.7% and 2.3% in Europe. Average increases in European banking and insurance lines of business are generally 0.2% to 1% lower than in North America, whereas increases for the equities and fixed income lines of business are more similar.


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Europe Projected/Forecasted 2016 Base Salary Increases

25th Percentile


No. of Responses



25th Percentile


No. of Responses



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North America Projected/Forecasted 2016 Base Salary Increases

25th Percentile


No. of Responses



25th Percentile


No. of Responses



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Growth Markets Projected/Forecasted 2016 Base Salary Increases

25th Percentile


No. of Responses

Senior Corporate Management -- 4.3% -- -- 3 Control Functions 4.8% 5.3% 5.0% 5.7% 6 Staff Positions -- 5.4% 5.0% -- 4 Commercial Banking -- -- -- -- 1 Retail Banking -- -- -- -- 1 Investment Banking -- 6.9% 6.4% -- 4 Equities -- 5.5% 5.0% -- 4 Fixed-Income -- 5.9% -- -- 3 Asset Management 4.6% 5.4% 5.0% 6.4% 5 Private Banking/High Net Worth -- -- -- -- 2 Private Equity -- 5.7% -- -- 3 Property & Casualty Insurance -- -- -- -- 1 Life Insurance -- 5.6% -- -- 3 Based on all responses Note: There were no freezes reported in Growth Markets


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By industry The banking industry is generally projecting slightly lower salary increases than the insurance industry and investment management and others. In particular, average increases for senior corporate management in banks are lower (1.9%) than in the insurance industry (2.2%). Banking Projected/Forecasted 2016 Base Salary Increases

25th Percentile


No. of Responses



25th Percentile


No. of Responses



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Insurance Projected/Forecasted 2016 Base Salary Increases

25th Percentile


No. of Responses

Senior Corporate Management 1.0% 2.2% 2.5% 3.0% 19 Control Functions 2.0% 2.6% 2.6% 3.0% 20 Staff Positions 2.0% 2.6% 2.6% 3.0% 20 Commercial Banking -- -- -- -- 2 Retail Banking -- -- -- -- 2 Investment Banking -- -- -- -- 1 Equities -- 2.2% 2.9% -- 4 Fixed-Income 1.5% 2.2% 2.6% 3.0% 6 Asset Management 2.0% 2.5% 2.5% 3.0% 11 Private Banking/High Net Worth -- -- -- -- 2 Private Equity 1.9% 2.4% 2.9% 3.0% 6 Property & Casualty Insurance 2.0% 2.5% 2.5% 3.0% 13 Life Insurance 2.0% 2.6% 2.6% 3.0% 16 Based on all responses


25th Percentile


No. of Responses

Senior Corporate Management 2.0% 2.8% 2.8% 3.0% 15 Control Functions 2.4% 2.9% 2.9% 3.2% 18 Staff Positions 2.4% 2.8% 2.9% 3.0% 18 Commercial Banking -- -- -- -- 1 Retail Banking -- -- -- -- 1 Investment Banking -- -- -- -- 0 Equities -- 2.9% -- -- 3 Fixed-Income 2.2% 2.7% 2.8% 3.0% 5 Asset Management 2.4% 2.7% 2.6% 3.0% 10 Private Banking/High Net Worth -- -- -- -- 1 Private Equity 2.6% 2.9% 3.0% 3.0% 5 Property & Casualty Insurance 2.5% 3.0% 3.0% 3.0% 11 Life Insurance 2.4% 3.0% 2.9% 3.2% 14 Based on positive responses (excluding zeros)


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Investment Management and Others Projected/Forecasted 2016 Base Salary Increases

25th Percentile


No. of Responses

Senior Corporate Management 0.0% 1.9% 2.8% 3.0% 9 Control Functions 2.7% 3.2% 3.0% 3.5% 10 Staff Positions 2.0% 2.8% 3.0% 3.0% 9 Commercial Banking -- 2.5% 3.0% -- 4 Retail Banking -- 2.5% 3.0% -- 4 Investment Banking 2.4% 4.1% 3.0% 6.2% 6 Equities 2.2% 3.0% 3.0% 4.0% 8 Fixed-Income 2.0% 2.8% 3.0% 3.0% 7 Asset Management 2.0% 2.9% 3.0% 4.0% 8 Private Banking/High Net Worth 1.8% 2.8% 3.0% 3.5% 6 Private Equity 2.4% 3.2% 3.0% 4.5% 6 Property & Casualty Insurance -- 2.5% 3.0% -- 4 Life Insurance -- 2.5% 3.0% -- 4 Based on all responses


25th Percentile


No. of Responses

Senior Corporate Management 2.8% 3.3% 3.0% 4.0% 5 Control Functions 2.7% 3.2% 3.0% 3.5% 10 Staff Positions 2.0% 2.8% 3.0% 3.0% 9 Commercial Banking -- 2.5% 3.0% -- 4 Retail Banking -- 2.5% 3.0% -- 4 Investment Banking 2.4% 4.1% 3.0% 6.2% 6 Equities 2.2% 3.0% 3.0% 4.0% 8 Fixed-Income 2.0% 2.8% 3.0% 3.0% 7 Asset Management 2.0% 2.9% 3.0% 4.0% 8 Private Banking/High Net Worth 1.8% 2.8% 3.0% 3.5% 6 Private Equity 2.4% 3.2% 3.0% 4.5% 6 Property & Casualty Insurance -- 2.5% 3.0% -- 4 Life Insurance -- 2.5% 3.0% -- 4 Based on positive responses (excluding zeros)


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3.2. Projected/Forecasted 2016 Base Salary Increases by Region

All regions and industries Organizations vary base salary increases significantly by region. Overall, Latin and South America and Asia are projecting higher average salary increases (4.3%) than any other regions for 2016. In particular, North America and Europe are forecasting lower average salary increases, 2.4% and 2.3% respectively. Projected/Forecasted 2016 Base Salary Increases

25th Percentile


No. of Responses

North America (Canada and US) 2.0% 2.4% 2.7% 3.0% 41 Latin and South America 3.0% 4.3% 4.2% 5.3% 21 Europe 1.6% 2.3% 2.5% 3.0% 49 Middle East and Africa 1.9% 3.3% 3.0% 4.8% 18 Asia 3.0% 4.3% 4.5% 5.4% 35 Based on all responses


25th Percentile


No. of Responses

North America (Canada and US) 2.0% 2.6% 2.9% 3.0% 38 Latin and South America 3.0% 4.5% 4.4% 5.4% 20 Europe 2.0% 2.5% 2.5% 3.0% 44 Middle East and Africa 2.9% 3.7% 3.5% 4.9% 16 Asia 3.0% 4.6% 4.6% 5.4% 33 Based on positive responses (excluding zeros)


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By industry Projected 2016 salary increases vary little by industry, but are slightly higher in the Middle East and Africa for banks. Across all industries, the Latin and South America and Asia regions have the highest salary increases for 2016 for the banking, insurance, and investment management lines of business generally from 4.0% to 4.8%.

Banking


25th Percentile


No. of Responses



25th Percentile


No. of Responses

North America (Canada and US) 2.0% 2.5% 2.5% 3.0% 17 Latin and South America 3.3% 4.9% 4.8% 5.8% 8 Europe 2.0% 2.5% 2.5% 3.0% 24 Middle East and Africa -- 4.7% 4.1% -- 4 Asia 3.1% 4.3% 4.5% 5.0% 13 Based on positive responses (excluding zeros)

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0%

North America

Latin and South America

Europe

Middle East and Africa

Asia

Banking Insurance


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Insurance Projected/Forecasted 2016 Base Salary Increases

25th Percentile


No. of Responses



25th Percentile


No. of Responses

North America (Canada and US) 2.4% 2.6% 2.8% 3.0% 14 Latin and South America 2.6% 4.0% 4.4% 5.4% 8 Europe 1.8% 2.6% 2.5% 3.0% 12 Middle East and Africa 1.5% 3.0% 3.0% 4.5% 5 Asia 3.0% 4.7% 5.0% 6.7% 11 Based on positive responses (excluding zeros)

Investment Management and Others


25th Percentile


No. of Responses

North America (Canada and US) 1.6% 2.6% 2.9% 3.0% 7 Latin and South America -- 4.7% 3.0% -- 4 Europe 1.7% 2.5% 2.9% 3.0% 8 Middle East and Africa 2.9% 3.7% 3.0% 5.0% 7 Asia 3.0% 4.8% 4.6% 6.1% 9 Based on all responses


25th Percentile


No. of Responses

North America (Canada and US) 1.6% 2.6% 2.9% 3.0% 7 Latin and South America -- 4.7% 3.0% -- 4 Europe 1.7% 2.5% 2.9% 3.0% 8 Middle East and Africa 2.9% 3.7% 3.0% 5.0% 7 Asia 3.0% 4.8% 4.6% 6.1% 9 Based on positive responses (excluding zeros)


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5%

hot Surve

However, m(see illustraking roles (2ing significa

evalent in fix. The prediil Banking, els as last y

15% 25

ey

more ation 20% antly xed-cted with year

5%


20 of 71


Predicted Change in 2016 Actual Incentives

Substantially Lower (-20%

or More) than Last

Year

Lower (-5% to -

15%) than Last Year

Similar (+/- 5%) to Last Year

Higher (+5 to +15%) than

Last Year

Substantially Higher

(+20% or More) than Last Year

N


4% 19% 67% 5% 5% 57

Control Functions 2% 20% 70% 7% 2% 60 Staff Positions 4% 22% 67% 6% 2% 54 Commercial Banking 3% 21% 73% 3% 0% 33 Retail Banking 0% 16% 84% 0% 0% 32 Investment Banking 3% 20% 57% 20% 0% 35

Equities 5% 26% 50% 18% 0% 38

Fixed-Income 5% 26% 57% 12% 0% 42

Asset Management 0% 20% 72% 9% 0% 46

Private Banking/High

Net Worth

0% 13% 77% 10% 0% 30

Private Equity 0% 19% 81% 0% 0% 27

Property & Casualty

Insurance

3% 17% 72% 7% 0% 29

Life Insurance 3% 19% 75% 3% 0% 32 Note: The total may not equal 100% due to rounding.


21 of 71


By region Most organizations in Europe predict 2016 annual incentive levels will be similar to 2015. Some European organizations predict that annual incentive levels will be lower in senior corporate management and in the control functions. Generally, North America has the highest proportion of firms that are predicting lower annual incentives than last year. Investment banking, equities, fixed-income and asset management have the largest proportion of firms predicting annual incentives that are higher than last year, in Europe and Growth Markets, however, North America is indicating moderately lower incentive levels (-5% to -15%). Europe Predicted Change in 2016 Actual Incentives

Substantially lower (-20%

or More) than Last

Year

Lower (-5% to -

15%) than Last Year



Last Year

Substantially higher (+20%

or More) than Last

Year

N


3% 20% 73% 3% 0% 30


Equities 5% 15% 60% 20% 0% 20

Fixed-Income 5% 14% 64% 18% 0% 22



Net Worth

0% 6% 88% 6% 0% 17

Private Equity 0% 9% 91% 0% 0% 11

Property & Casualty

Insurance

0% 13% 87% 0% 0% 15



22 of 71


North America

Predicted Change in 2016 Actual Incentives


or More) than Last

Year

Lower (-5% to -

15%) than Last Year



Last Year


or More) than Last

Year

N


4% 22% 52% 9% 13% 23


Equities 0% 50% 43% 7% 0% 14

Fixed-Income 0% 47% 53% 0% 0% 17



Net Worth

0% 27% 64% 9% 0% 11

Private Equity 0% 31% 69% 0% 0% 13

Property & Casualty

Insurance

8% 23% 54% 15% 0% 13



23 of 71


Growth Markets Predicted Change in 2016 Actual Incentives


or More) than Last

Year

Lower (-5% to -

15%) than Last Year



Last Year


or More) than Last

Year

N


0% 0% 100% 0% 0% 4

Control Functions 0% 0% 100% 0% 0% 6 Staff Positions 0% 0% 100% 0% 0% 3 Commercial Banking -- -- -- -- -- 1 Retail Banking -- -- -- -- -- 1 Investment Banking 0% 25% 25% 50% 0% 4

Equities 25% 0% 25% 50% 0% 4

Fixed-Income 33% 0% 33% 33% 0% 3



Net Worth

-- -- -- -- -- 2

Private Equity 0% 0% 100% 0% 0% 3

Property & Casualty

Insurance

-- -- -- -- -- 1



24 of 71


By industry Thirty percent of the insurance organizations predict 2016 annual incentive levels for their senior corporate management to be (significantly) lower, compared to 25% in banks. More banks predict 2016 annual incentive levels for their control functions to be similar to 2015 than insurers (77% versus 55% respectively). Approximately 35% of insurers are predicting lower annual incentives for both property & casualty and life insurance businesses. Banking Predicted Change in 2016 Actual Incentives


or More) than Last

Year

Lower (-5% to -

15%) than Last Year



Last Year


or More) than Last

Year

N


4% 21% 68% 7% 0% 28


Equities 7% 18% 57% 18% 0% 28

Fixed-Income 7% 20% 60% 13% 0% 30



Net Worth

0% 8% 84% 8% 0% 25

Private Equity 0% 12% 88% 0% 0% 17

Property & Casualty

Insurance

0% 7% 93% 0% 0% 14



25 of 71


Insurance Predicted Change in 2016 Actual Incentives


or More) than Last

Year

Lower (-5% to -

15%) than Last Year



Last Year


or More) than Last

Year

N


5% 25% 60% 5% 5% 20

Control Functions 0% 30% 55% 15% 0% 20 Staff Positions 6% 28% 56% 11% 0% 18 Commercial Banking 0% 75% 25% 0% 0% 4 Retail Banking 0% 50% 50% 0% 0% 4 Investment Banking -- -- -- -- -- 2

Equities 0% 75% 25% 0% 0% 4

Fixed-Income 0% 43% 57% 0% 0% 7



Net Worth

-- -- -- -- -- 2

Private Equity 0% 43% 57% 0% 0% 7

Property & Casualty

Insurance

7% 29% 50% 14% 0% 14



26 of 71


Investment Management and Others Predicted Change in 2016 Actual Incentives


or More) than Last

Year

Lower (-5% to -

15%) than Last Year



Last Year


or More) than Last

Year

N


0% 0% 78% 0% 22% 9

Control Functions 0% 0% 78% 11% 11% 9 Staff Positions 0% 0% 75% 12% 12% 8 Commercial Banking -- -- -- -- -- 2 Retail Banking -- -- -- -- -- 1 Investment Banking 0% 0% 33% 67% 0% 3

Equities 0% 33% 33% 33% 0% 6

Fixed-Income 0% 40% 40% 20% 0% 5



Net Worth

0% 0% 67% 33% 0% 3

Private Equity 0% 0% 100% 0% 0% 3

Property & Casualty

Insurance

-- -- -- -- -- 1

Life Insurance -- -- -- -- -- 1 Note: The total may not equal 100% due to rounding.


27 of 71

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3.4

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28 of 71


Projected Change in 2016 Target Incentives


or More) than Last

Year

Lower (-5% to -

15%) than Last Year



Last Year


or More) than Last

Year

N


0% 4% 90% 4% 2% 52


Equities 3% 3% 83% 10% 0% 30

Fixed-Income 0% 6% 88% 6% 0% 34



Net Worth

0% 0% 91% 9% 0% 23

Private Equity 0% 0% 91% 9% 0% 23

Property & Casualty

Insurance

0% 7% 85% 7% 0% 27



29 of 71


By region While some European companies are planning to raise target annual incentive levels, with the private equity, equities, and investment banking lines of business being the most affected, the majority of organizations are forecasting similar 2016 target incentive levels. Europe Projected Change in 2016 Target Incentives


or More) than Last

Year

Lower (-5% to -

15%) than Last Year



Last Year


or More) than Last

Year

N


0% 8% 88% 4% 0% 26

Control Functions 4% 0% 92% 4% 0% 24 Staff Positions 0% 13% 83% 4% 0% 23 Commercial Banking 0% 0% 94% 6% 0% 16 Retail Banking 0% 6% 88% 6% 0% 16 Investment Banking 0% 0% 87% 13% 0% 15 Equities 0% 0% 86% 14% 0% 14 Fixed-Income 0% 0% 94% 6% 0% 16 Asset Management 0% 0% 95% 5% 0% 19 Private Banking/High

Net Worth

0% 0% 91% 9% 0% 11

Private Equity 0% 0% 78% 22% 0% 9 Property & Casualty

Insurance

0% 7% 86% 7% 0% 14

Life Insurance 0% 7% 86% 7% 0% 14


30 of 71


North America

In North America, nearly all organizations are forecasting similar 2016 target annual incentive levels.

Projected Change in 2016 Target Incentives


or More) than Last

Year

Lower (-5% to -

15%) than Last Year



Last Year


or More) than Last

Year

N


0% 0% 91% 5% 5% 22


Net Worth

0% 0% 100% 0% 0% 10


Insurance

0% 0% 92% 8% 0% 12



31 of 71


Growth Markets Projected Change in 2016 Target Incentives


or More) than Last

Year

Lower (-5% to -

15%) than Last Year



Last Year


or More) than Last

Year

N


0% 0% 100% 0% 0% 4

Control Functions 0% 17% 83% 0% 0% 6 Staff Positions 0% 33% 67% 0% 0% 3 Commercial Banking -- -- -- -- -- 1 Retail Banking -- -- -- -- -- 1 Investment Banking 0% 25% 50% 25% 0% 4 Equities 25% 0% 50% 25% 0% 4 Fixed-Income 0% 33% 33% 33% 0% 3 Asset Management 0% 20% 60% 20% 0% 5 Private Banking/High

Net Worth

-- -- -- -- -- 2


Insurance

-- -- -- -- -- 1



32 of 71


By industry Banking Projected Change in 2016 Target Incentives


or More) than Last

Year

Lower (-5% to -

15%) than Last Year



Last Year


or More) than Last

Year

N


0% 4% 87% 4% 4% 23


Net Worth

0% 0% 89% 11% 0% 18


Insurance

0% 9% 82% 9% 0% 11



33 of 71


Insurance Projected Change in 2016 Target Incentives


or More) than Last

Year

Lower (-5% to -

15%) than Last Year



Last Year


or More) than Last

Year

N


0% 5% 95% 0% 0% 20


Net Worth

-- -- -- -- -- 2


Insurance

0% 7% 87% 7% 0% 15



34 of 71


Investment Management and Others Projected Change in 2016 Target Incentives


or More) than Last

Year

Lower (-5% to -

15%) than Last Year



Last Year


or More) than Last

Year

N


0% 0% 89% 11% 0% 9

Control Functions 0% 0% 89% 11% 0% 9 Staff Positions 0% 0% 88% 12% 0% 8 Commercial Banking -- -- -- -- -- 2 Retail Banking -- -- -- -- -- 1 Investment Banking 0% 0% 67% 33% 0% 3 Equities 0% 17% 67% 17% 0% 6 Fixed-Income 0% 20% 60% 20% 0% 5 Asset Management 0% 14% 71% 14% 0% 7 Private Banking/High

Net Worth

0% 0% 100% 0% 0% 3


Insurance

-- -- -- -- -- 1

Life Insurance -- -- -- -- -- 1 Note: The total may not equal 100% due to rounding.


35 of 71


3.5. Predicted Change in the Overall Actual and Target Corporate Incentive Pool Compared to Prior Year

All regions and industries As the chart below shows, the majority of organizations predict that the 2016 target and actual corporate incentive pools will be similar to 2015 levels. Around 20% of organizations predict the actual 2016 incentive pool to be (significantly) lower than 2015 levels, while 16% predict it to be (significantly) higher. Only 9% of organizations are increasing the target incentive pool next year, and 5% are lowering.


or More) than Last

Year

Lower (-5% to -

15%) than Last Year



Last Year


or more) than Last

Year

N

Predicted Change in Actual Incentive Pool (for 2015 performance)

2% 20% 62% 13% 3% 61

Projected Change in next year’s Target Incentive

0% 5% 86% 9% 0% 57

0% 20% 40% 60% 80% 100%

Substantially lower

Lower

Similar

Higher

Substantially higher




36 of 71


By region Thirty percent of North American organizations expect the actual incentive pool to be (significantly) lower than last year, compared to only 19% in Europe. Most organizations across regions expect to maintain target incentive pools similar to last year.

Europe Substantially

lower (-20% or more)

than Last Year

Lower (-5% to -

15%) than Last Year



Last Year


or More) than Last

Year

N


0% 19% 69% 9% 3% 32


0% 3% 93% 3% 0% 29

Note: The total may not equal 100% due to rounding.

North America Substantially

lower (-20% or More)

than Last Year

Lower (-5% to -

15%) than Last Year



Last Year


or More) than Last

Year

N


4% 26% 48% 17% 4% 23


0% 9% 77% 14% 0% 22

Growth Markets Substantially

lower (-20% or more)

than Last Year

Lower (-5% to -

15%) than Last Year



Last Year


or More) than Last

Year

N


0% 0% 83% 17% 0% 6


0% 0% 83% 17% 0% 6


37 of 71


By industry Very few differences in expected 2016 target and actual corporate incentive pools exist by industry. The banking and insurance industries generally plan to maintain 2015 target levels with a few investment management and others expecting some modest decreases.

Banking Substantially


than Last Year

Lower (-5% to -

15%) than Last Year



Last Year


or More) than Last

Year

N


0% 23% 65% 10% 3% 31


0% 0% 92% 8% 0% 26


Insurance Substantially


than Last Year

Lower (-5% to -

15%) than Last Year



Last Year


or More) than Last

Year

N


5% 20% 60% 15% 0% 20


0% 5% 86% 10% 0% 21


Investment Management and Others Substantially


than Last Year

Lower (-5% to -

15%) than Last Year



Last Year


or More) than Last

Year

N


0% 10% 60% 20% 10% 10


0% 20% 70% 10% 0% 10


38 of 71


4. CHANGES TO ANNUAL AND MULTI-YEAR INCENTIVE DESIGNS AND PAY MIX

4.1. Planned Changes to Corporate Annual Incentive Design for 2016

All regions and industries Most organizations are not planning to make changes to their incentive design in 2016. Some organizations are considering increasing individual differentiation in bonus distribution (30%) which is the most prevalent change. Nineteen percent are planning on increasing the weight of non-financial performance measures. More than 15% of organizations are planning to increase the use of risk-adjusted measures at the business unit and individual levels.

-15% -5% 5% 15% 25% 35%

Weight of financial performance measures

Bonus/incentive eligibility

Amount of discretion applied

Weight of non-financial performance measures

Maximum incentive level

Target incentive level

Use of risk-adjusted measures at individual level

Use of risk-adjusted measures at business unit level

Individual differentiation in bonus distribution

Decrease Increase


39 of 71


Planned Changes to Corporate Annual Incentive Design

Increase Decrease No Change

No. of Responses

Weight of financial performance measures 13% 10% 77% 69 Weight of non-financial performance measures 19% 6% 75% 69 Use of risk-adjusted measures at business unit level 19% 0% 81% 69 Use of risk-adjusted measures at individual level 16% 0% 84% 69 Bonus/incentive eligibility 3% 7% 90% 69 Individual differentiation in bonus distribution 30% 0% 70% 69 Target incentive level 9% 4% 87% 67 Maximum incentive level 6% 4% 90% 68 Amount of discretion applied 9% 6% 85% 67 Other 12% 4% 85% 26 Note: The total may not equal 100% due to rounding. Other includes: addition of qualitative metric; combining multiple incentive plans into a single annual incentive plan; customer metric; increase of empowerment to countries in terms of bonus pool calculation.

By region Although prevalent in both regions, more European organizations (35%) are planning to increase individual differentiation in bonus distribution, than in North America (27%). European organizations cite the increased weight of non-financial performance measures and use of risk-adjusted measures at business and individual levels more frequently than their North American counterparts. Fourteen percent of European organizations are planning to decrease the bonus/incentive eligibility while none in North America are considering this. Planned Changes to Corporate Annual Incentive Design

Europe North America Growth Markets

Incr

ease

Dec

reas

e

No.

of

Res

pons

es

Incr

ease

Dec

reas

e

No.

of

Res

pons

es

Incr

ease

Dec

reas

e

No.

of

Res

pons

es


14% 14% 37 8% 8% 26 33% 0% 6


22% 3% 37 15% 8% 26 17% 17% 6


24% 0% 37 12% 0% 26 17% 0% 6


22% 0% 37 12% 0% 26 0% 0% 6

Bonus/incentive eligibility 0% 14% 37 4% 0% 26 17% 0% 6 Individual differentiation in bonus distribution

35% 0% 37 27% 0% 26 17% 0% 6

Target incentive level 3% 9% 35 15% 0% 26 17% 0% 6 Maximum incentive level 5% 8% 37 8% 0% 26 0% 0% 5 Amount of discretion applied 9% 3% 35 8% 8% 26 17% 17% 6 Other 11% 0% 9 12% 6% 16 -- -- 1 Note: “No change'” option is not displayed in the table; therefore, the total may not equal 100%.


40 of 71


By industry Significant differences exist between the insurance and banking industry. Nearly 40% of insurance organizations want to increase individual differentiation in bonus distribution, compared to 26% in banking. Banks cite the increased use of risk-adjusted measures at business and individual levels more frequently than insurers. More insurance firms are planning changes to the use of discretion (13% increase the use, and 13% decrease it).

Planned Changes to Corporate Annual Incentive Design

Banking Insurance Investment Management and

Others

Incr

ease

Dec

reas

e

No.

of

Res

pons

es

Incr

ease

Dec

reas

e

No.

of

Res

pons

es

Incr

ease

Dec

reas

e

No.

of

Res

pons

es


11% 11% 35 17% 12% 24 10% 0% 10


17% 3% 35 25% 12% 24 10% 0% 10


26% 0% 35 4% 0% 24 30% 0% 10


23% 0% 35 4% 0% 24 20% 0% 10

Bonus/incentive eligibility 0% 11% 35 4% 4% 24 10% 0% 10 Individual differentiation in bonus distribution

26% 0% 35 38% 0% 24 30% 0% 10

Target incentive level 3% 6% 34 9% 4% 23 30% 0% 10 Maximum incentive level 6% 6% 35 9% 4% 23 0% 0% 10 Amount of discretion applied 6% 0% 34 13% 13% 23 10% 10% 10 Other 8% 0% 13 20% 0% 10 0% 33% 3 Note: “No change” option is not displayed in the table; therefore, the total may not equal 100%.


41 of 71


4.1.1. Planned Changes to Allocation of Annual Incentives to Individuals Most organizations across Europe and North America and all industry segments expect no changes planned to allocation of annual incentives to individuals: 83% of insurers and 78% of banks are expecting no changes. A few (11%) of the banks and European organizations are moving to a more discretionary allocation.

Planned Changes to Allocation of Annual Incentives

All Regions

and Industries

Region Industry


Growth Markets

Banking Insurance Investment Management

and Others

Yes, moving to formal target bonus system

1% 0% 0% 17% 0% 0% 10%

Yes, moving to evaluation of scorecard with financial and non-financial criteria

3% 3% 0% 17% 3% 4% 0%

Yes, moving to more structured, formulaic approach

6% 8% 0% 17% 8% 4% 0%

Yes, moving to more discretionary allocation

9% 11% 8% 0% 11% 8% 0%

No, no changes planned

81% 79% 92% 50% 78% 83% 90%

No. of Responses

70 38 26 6 36 24 10



42 of 71


4.2. Planned Changes in the Mandatory Deferral Design for 2016

4.2.1. Prevalence of Mandatory Deferral Programs Nearly all banks and around 42% of insurance firms have a mandatory deferral mechanism in place. Half of the North American organizations have a mandatory deferral program in place, and the vast majority (87%) in Europe. Organizations are generally not planning to introduce mandatory deferrals in 2016.

Prevalence of Mandatory Deferral Programs

All Regions

and Industries

Region Industry


Growth Markets


and Others

No mandatory deferral program in place

30% 11% 50% 57% 11% 54% 40%

Planning to introduce mandatory deferral program in 2016

1% 3% 0% 0% 0% 4% 0%

Mandatory deferral in place

69% 87% 50% 43% 89% 42% 60%

No. of Responses

71 38 26 7 37 24 10


0% 20% 40% 60% 80% 100%

Europe

North America

Growth Markets

Banking

Insurance


Re

gio

nIn

dust

ry

Mandatory deferral in placePlanning to introduce mandatory deferral program in 2016No mandatory deferral program in place


43 of 71


4.2.2. Planned Changes to Mandatory Deferral Design for 2016 Only a few organizations are planning to make changes to their mandatory deferral program design. About 18% of organizations are increasing the eligibility for the mandatory deferral program and the mandatory deferral period.

Planned Changes to Mandatory Deferral Design Increase Decrease No Change

No. of Responses

Eligibility for mandatory deferral 18% 2% 80% 51 Required mandatory deferred portion of bonus 8% 2% 90% 51 Maximum payout/leverage 4% 0% 96% 50 Mandatory deferral period (performance/vesting period)

18% 2% 80% 51

Additional required holding period (after vesting period)

6% 4% 90% 51

Weight of financial performance measures 4% 2% 94% 51 Weight of non-financial performance measures 4% 2% 94% 51 Rigor of performance conditions 8% 0% 92% 51 Amount of discretion applied 4% 8% 88% 50 Use of malus conditions (prior to vesting) 4% 2% 94% 50 Use of clawback provisions (after vesting) 4% 0% 96% 49 Other 9% 0% 91% 11 Other includes: deferral will be based on Total Compensation, instead of Incentive Compensation; deferral only for some roles.

-10% -5% 0% 5% 10% 15% 20%

Eligibility for mandatory deferral

Required mandatory deferred portion of bonus

Maximum payout/leverage

Mandatory deferral period (performance/vesting period)




Rigor of performance conditions


Use of malus conditions (prior to vesting)

Use of clawback provisions (after vesting)

Decrease Increase


44 of 71


By region Approximately 20% of European and North American organizations are planning to increase eligibility for mandatory deferral. Almost one quarter (24%) of European organizations plan to increase the mandatory deferral period, whereas only 7% of North American organizations are planning this. Fourteen percent of organizations in North America are increasing the required mandatory deferred portion of bonus, compared to only 6% in Europe. Planned Changes to Mandatory Deferral Design


Incr

ease

Dec

reas

e

No.

of

Res

pons

es

Incr

ease

Dec

reas

e

No.

of

Res

pons

es

Incr

ease

Dec

reas

e

No.

of

Res

pons

es

Eligibility for mandatory deferral 18% 3% 34 21% 0% 14 0% 0% 3 Required mandatory deferred portion of bonus

6% 3% 34 14% 0% 14 0% 0% 3

Maximum payout/leverage 3% 0% 33 7% 0% 14 0% 0% 3 Mandatory deferral period (performance/vesting period)

24% 0% 34 7% 7% 14 0% 0% 3


9% 3% 34 0% 7% 14 0% 0% 3


6% 3% 34 0% 0% 14 0% 0% 3


3% 3% 34 7% 0% 14 0% 0% 3

Rigor of performance conditions 9% 0% 34 7% 0% 14 0% 0% 3 Amount of discretion applied 3% 9% 33 7% 7% 14 0% 0% 3 Use of malus conditions (prior to vesting)

3% 3% 33 7% 0% 14 0% 0% 3


3% 0% 32 7% 0% 14 0% 0% 3

Other 20% 0% 5 0% 0% 5 -- -- 1 Note: “No change” option is not displayed in the table; therefore, the total may not equal 100%.


45 of 71


By industry Insurance organizations are rarely planning changes to their mandatory deferral design. In the banking industry, over 20% of organizations are planning to increase the mandatory deferral period and 18% are increasing the eligibility levels. Planned Changes to Mandatory Deferral Design


Others

Incr

ease

Dec

reas

e

No.

of

Res

pons

es

Incr

ease

Dec

reas

e

No.

of

Res

pons

es

Incr

ease

Dec

reas

e

No.

of

Res

pons

es

Eligibility for mandatory deferral 18% 3% 33 8% 0% 12 33% 0% 6 Required mandatory deferred portion of bonus

3% 3% 33 8% 0% 12 33% 0% 6

Maximum payout/leverage 3% 0% 32 8% 0% 12 0% 0% 6 Mandatory deferral period (performance/vesting period)

21% 0% 33 0% 8% 12 33% 0% 6


9% 3% 33 0% 8% 12 0% 0% 6


3% 0% 33 8% 8% 12 0% 0% 6


0% 3% 33 8% 0% 12 17% 0% 6


0% 3% 33 9% 0% 11 17% 0% 6


3% 0% 33 0% 0% 10 17% 0% 6

Other 0% 0% 4 25% 0% 4 0% 0% 3 Note: “No change” option is not displayed in the table; therefore, the total may not equal 100%.


46 of 71


4.2.3. Changes Planned to Vehicle Mix of Mandatory Deferral for 2016 All regions and industries Very few organizations are planning to change the vehicle mix of mandatory deferrals for 2016. Nearly 10% of European organizations are planning to increase performance shares. Some insurers (12%) are planning to decrease the weight of service-based restricted stock and stock options.

Changes Planned to Vehicle Mix of Mandatory Deferral

Increase Decrease No Change No. of Responses

Cash-based plans 4% 0% 96% 50 Service-based restricted stock 0% 2% 98% 45 Performance shares 6% 2% 92% 49 Stock options/SAR 0% 2% 98% 45 Contingent capital/debt-based instruments

0% 0% 100% 45

By region Changes Planned to Vehicle Mix of Mandatory Deferral


Incr

ease

Dec

reas

e

No.

of

Res

pons

e

Incr

ease

Dec

reas

e

No.

of

Res

pons

e

Incr

ease

Dec

reas

e

No.

of

Res

pons

e

Cash-based plans 6% 0% 33 0% 0% 14 0% 0% 3 Service-based restricted stock 0% 0% 29 0% 8% 13 0% 0% 3 Performance shares 9% 0% 32 0% 7% 14 0% 0% 3 Stock options/SAR 0% 0% 29 0% 8% 13 0% 0% 3 Contingent capital/debt-based instruments

0% 0% 30 0% 0% 12 0% 0% 3

Note: “No change” option is not displayed in the table; therefore, the total may not equal 100%.

By industry Changes Planned to Vehicle Mix of Mandatory Deferral


Others

Incr

ease

Dec

reas

e

No.

of

Res

pons

e

Incr

ease

Dec

reas

e

No.

of

Res

pons

e

Incr

ease

Dec

reas

e

No.

of

Res

pons

e


0% 0% 31 0% 0% 8 0% 0% 6



47 of 71


4.3. Planned Changes to Forward-looking Long-term Incentive Design for 2016

4.3.1. Prevalence of Forward-looking Long-term Incentive Programs The majority of organizations have a forward-looking long-term incentive plan in place, particularly insurance firms with 88%. Around 41% of banking organizations do not have a forward-looking long-term incentive program in place. Forward-looking long-term incentive plans are more prevalent in North America (85%) than in Europe (61%). Organizations are generally not planning to introduce forward-looking long-term incentive plans in 2016.

Prevalence of Forward-looking Long-term Incentive Programs

All Regions

and Industries

Region Industry


Growth Markets


and Others

No forward-looking long-term incentive program in place

27% 37% 15% 14% 41% 12% 10%

Planning to introduce forward-looking long-term incentive program in 2016

1% 3% 0% 0% 3% 0% 0%

Forward looking long-term incentives in place

72% 61% 85% 86% 57% 88% 90%

No. of Responses

71 38 26 7 37 24 10


0% 20% 40% 60% 80% 100%

Europe

North America

Growth Markets

Banking

Insurance


Re

gio

nIn

dust

ry

Forward looking long-term incentives in placePlanning to introduce forward-looking long-term incentive program in 2016No forward-looking long-term incentive program in place


48 of 71


4.3.2. Planned Changes to Forward-looking Long-term Incentive Design for 2016

Although changes to forward-looking long-term incentive plans are not prevalent, 12% of organizations are planning to increase employee eligibility, rigor of performance conditions, and use of clawback provisions (after vesting).

Planned Changes to Forward-looking Long-term Incentive Design

Increase Decrease No Change

No. of Responses

Eligibility for forward-looking long-term incentive 12% 8% 81% 52 Target award levels 6% 2% 92% 52 Maximum payout/leverage 2% 0% 98% 52 Performance/vesting period 8% 0% 92% 52 Additional required deferral period (after performance period) 4% 0% 96% 52 Additional required holding period (after vesting period) 6% 0% 94% 52 Weight of financial performance measures 4% 4% 92% 51 Weight of non-financial performance measures 6% 2% 92% 52 Rigor of performance conditions 12% 0% 88% 52 Amount of discretion applied 2% 6% 92% 51 Use of malus conditions (prior to vesting) 6% 0% 94% 52 Use of clawback provisions (after vesting) 12% 0% 88% 51 Other 0% 0% 100% 21 Note: The total may not equal 100% due to rounding. Other includes: adding qualitative metric.

-10% -5% 0% 5% 10% 15%

Eligibility for forward-looking long-term incentive

Target award levels


Performance/vesting period

Additional required deferral period (after performance period)








Decrease Increase


49 of 71


By region Increasing the eligibility is particularly prevalent in Europe and Growth Markets at 17% and 20% compared to less than 5% in North America. Thirteen percent of North American organizations are considering decreasing eligibility. More organizations in North America plan to increase the use of clawbacks (18%) and the rigor of performance conditions (17%), compared to Europe (4% and 8% respectively).

-15% -5% 5% 15% 25%








Additional required deferral period (after performance period)

Performance/vesting period


Target award levels


Europe Decrease North America Decrease

Europe Increase North America Increase


50 of 71


Planned Changes to Forward-looking Long-term Incentive Design


Incr

ease

Dec

reas

e

No.

of

Res

pons

es

Incr

ease

Dec

reas

e

No.

of

Res

pons

es

Incr

ease

Dec

reas

e

No.

of

Res

pons

es


17% 4% 24 4% 13% 23 20% 0% 5

Target award levels 4% 0% 24 4% 0% 23 20% 20% 5 Maximum payout/leverage 4% 0% 24 0% 0% 23 0% 0% 5 Performance/vesting period 8% 0% 24 4% 0% 23 20% 0% 5 Additional required deferral period (after performance period)

4% 0% 24 4% 0% 23 0% 0% 5


4% 0% 24 9% 0% 23 0% 0% 5


4% 8% 24 0% 0% 22 20% 0% 5


8% 4% 24 4% 0% 23 0% 0% 5


4% 0% 24 9% 0% 23 0% 0% 5


4% 0% 24 18% 0% 22 20% 0% 5

Other 0% 0% 8 0% 0% 11 -- -- 2 Note: “No change” option is not displayed in the table; therefore, the total may not equal 100%.


51 of 71


By industry Some differences are observed by industry. Around 10% of banking organizations plan on increasing performance/vesting period and additional required holding period (after vesting period) in their forward-looking incentive plans, whereas none of the insurers are planning this. Both banks and insurers are increasing the rigor in performance conditions. Planned Changes to Forward-looking Long-term Incentive Design


Others In

crea

se

Dec

reas

e

No.

of

Res

pons

es

Incr

ease

Dec

reas

e

No.

of

Res

pons

es

Incr

ease

Dec

reas

e

No.

of

Res

pons

es


14% 5% 21 9% 9% 22 11% 11% 9

Target award levels 0% 5% 21 9% 0% 22 11% 0% 9 Maximum payout/leverage 0% 0% 21 5% 0% 22 0% 0% 9 Performance/vesting period 10% 0% 21 0% 0% 22 22% 0% 9 Additional required deferral period (after performance period)

5% 0% 21 0% 0% 22 11% 0% 9


10% 0% 21 0% 0% 22 11% 0% 9


5% 0% 21 0% 10% 21 11% 0% 9


0% 5% 21 9% 0% 22 11% 0% 9


10% 0% 21 14% 0% 22 11% 0% 9

Amount of discretion applied 0% 5% 21 0% 10% 21 11% 0% 9 Use of malus conditions (prior to vesting)

5% 0% 21 5% 0% 22 11% 0% 9


5% 0% 21 10% 0% 21 33% 0% 9

Other 0% 0% 8 0% 0% 9 0% 0% 4 Note: “No change” option is not displayed in the table; therefore, the total may not equal 100%.


52 of 71


4.3.3. Planned Changes to Vehicle Mix of Forward-looking Incentives for 2016

All regions and industries The large majority of organizations are not planning to change the vehicle mix in multi-year awards for 2016. Approximately 6% of organizations are considering increasing the use of performance shares. Planned Changes to Vehicle Mix of Forward-looking Incentives

Increase Decrease No Change No. of Responses

Cash-based plans 4% 4% 92% 49 Service-based restricted stock 0% 0% 100% 45 Performance shares 6% 0% 94% 49 Stock options/SAR 0% 0% 100% 43 Contingent capital/debt-based instruments

0% 0% 100% 43

By region Nine percent of North American organizations plan to increase the weight of performance shares. Planned Changes to Vehicle Mix of Forward-looking Incentives


Incr

ease

Dec

reas

e

No.

of

Res

pons

es

Incr

ease

Dec

reas

e

No.

of

Res

pons

es

Incr

ease

Dec

reas

e

No.

of

Res

pons

es


0% 0% 19 0% 0% 20 0% 0% 4



53 of 71


By industry

Planned Changes to Vehicle Mix of Forward-looking Incentives


Others

Incr

ease

Dec

reas

e

No.

of

Res

pons

es

Incr

ease

Dec

reas

e

No.

of

Res

pons

es

Incr

ease

Dec

reas

e

No.

of

Res

pons

es


0% 0% 20 0% 0% 14 0% 0% 9


4.4. Planned Changes to Pay Mix for 2016 All regions and industries The majority of organizations are not planning to make changes to their pay mix in 2016. Thirteen percent of organizations (and 21% of European organizations) are increasing the weight of their base salaries. In addition, 10% of organizations are increasing the weight of role-based allowances (14% in Europe and Growth Markets). Nine percent of organizations are increasing the weight of mandatory deferrals.

-10% -5% 0% 5% 10% 15%

Change the weight of base salary

Change the weight of role-based allowances

Change the weight of annual/non-deferred incentives

Change the weight of mandatory deferrals

Change the weight of forward-looking long-termincentives

Change the weight of benefits (includingretirement/pension)

Change the weight of perquisites

Decrease Increase


54 of 71


Planned Changes to Pay Mix Increase Decrease No Change

Not Applicable/

Not in Place

No. of Responses

Change the weight of base salary 13% 0% 81% 6% 69 Change the weight of role-based allowances

10% 6% 52% 31% 67


4% 4% 81% 10% 69


9% 0% 69% 22% 67

Change the weight of forward-looking long-term incentives

7% 3% 67% 23% 70

Change the weight of benefits (including retirement/pension)

3% 7% 83% 7% 70

Change the weight of perquisites 1% 1% 79% 18% 68 Note: The total may not equal 100% due to rounding.

By region Approximately 20% of the European organizations are expected to increase the weight of their base salary. North America expects to see an increase in the weight of mandatory deferrals.

Planned Changes to Pay Mix Europe North America Growth Markets

Incr

ease

Dec

reas

e

No.

of

Res

pons

es

Incr

ease

Dec

reas

e

No.

of

Res

pons

es

Incr

ease

Dec

reas

e

No.

of

Res

pons

es

Change the weight of base salary 21% 0% 38 4% 0% 24 0% 0% 7 Change the weight of role-based allowances

14% 11% 37 4% 0% 23 14% 0% 7


3% 3% 38 4% 8% 24 14% 0% 7


8% 0% 36 13% 0% 24 0% 0% 7


8% 3% 38 4% 4% 25 14% 0% 7


3% 5% 38 0% 12% 25 14% 0% 7

Change the weight of perquisites 0% 0% 36 4% 4% 25 0% 0% 7 Note: “No change” and “Not Applicable/Not in Place” options are not displayed in the table; therefore, the total may not equal 100%.


55 of 71


By industry Changes to the pay mix are more prevalent in the banking industry than in the insurance industry. Banks are generally increasing the weight of base salaries and role-based allowances. Changes to the weight of forward-looking long-term incentives are mixed: 6% of banks are increasing the weight and 6% are decreasing the weight, while 8% of insurers are increasing their weight in the pay mix.

-10% -5% 0% 5% 10% 15% 20% 25%

Change the weight of benefits (includingretirement/pension)

Change the weight of forward-looking long-termincentives


Change the weight of annual/non-deferredincentives

Change the weight of role-based allowances

Change the weight of base salary

Insurance Decrease Banking Decrease

Insurance Increase Banking Increase


56 of 71


Planned Changes to Pay Mix Banking Insurance Investment Management and

Others

Incr

ease

Dec

reas

e

No.

of

Res

pons

es

Incr

ease

Dec

reas

e

No.

of

Res

pons

es

Incr

ease

Dec

reas

e

No.

of

Res

pons

es

Change the weight of base salary 22% 0% 36 4% 0% 23 0% 0% 10 Change the weight of role-based allowances

14% 8% 36 0% 5% 21 20% 0% 10


0% 6% 36 4% 0% 23 20% 10% 10


9% 0% 35 5% 0% 22 20% 0% 10


6% 6% 36 8% 0% 24 10% 0% 10


3% 5% 37 4% 9% 23 0% 10% 10

Change the weight of perquisites 0% 0% 36 0% 0% 22 10% 10% 10 Note: “No change’ and “Not Applicable/Not in Place” options are not displayed in the table; therefore, the total may not equal 100%.


57 of 71


5. CONTROL FUNCTIONS AND FOSTERING A SOUND RISK CULTURE

5.1. Effect of Regulations on Control Functions All regions and industries Across all regions and industries fixed pay levels are increasing for control functions (41% of organizations) while variable pay levels are decreasing (31% of organizations). In the European market, organizations (46%) are increasing their fixed pay levels and their pay linkages to function performance (28%) while decreasing pay linkages to company/business performance (31%). In North America, the regulations are causing the organizations to see a decrease in the ease of attraction and retention as well as in variable pay levels. Across the different industries the regulations on control functions are affecting the total compensation levels; banking and investment management and other industries are increasing (in 19% and 30% of organizations respectively).

-35% -25% -15% -5% 5% 15% 25% 35% 45%

Fixed pay levels

Variable pay levels

Total Compensation levels

Their pay linkages to function performance

Their pay linkages to company/business performance

Ease of attraction

Ease of retention

Decrease Increase


58 of 71


Effect of Regulations on Control Functions Increase Decrease No Change

No. of Responses

Fixed pay levels 41% 0% 59% 68 Variable pay levels 7% 31% 62% 68 Total Compensation levels 16% 7% 76% 68 Their pay linkages to function performance 26% 5% 70% 66 Their pay linkages to company/business performance 9% 24% 67% 67 Ease of attraction 6% 21% 73% 67 Ease of retention 6% 22% 72% 67 Note: The total may not equal 100% due to rounding.

By region Effect of Regulations on Control Functions


Incr

ease

Dec

reas

e

No.

of

Res

pons

es

Incr

ease

Dec

reas

e

No.

of

Res

pons

es

Incr

ease

Dec

reas

e

No.

of

Res

pons

es

Fixed pay levels 46% 0% 37 36% 0% 25 33% 0% 6 Variable pay levels 8% 41% 37 4% 24% 25 17% 0% 6 Total Compensation levels 14% 14% 37 16% 0% 25 33% 0% 6 Their pay linkages to function performance

28% 3% 36 24% 8% 25 20% 0% 5


6% 31% 36 12% 20% 25 17% 0% 6

Ease of attraction 8% 19% 36 0% 28% 25 17% 0% 6 Ease of retention 11% 22% 36 0% 28% 25 0% 0% 6 Note: “No change” option is not displayed in the table; therefore, the total may not equal 100%.


59 of 71


By industry Effect of Regulations on Control Functions


Others

Incr

ease

Dec

reas

e

No.

of

Res

pons

es

Incr

ease

Dec

reas

e

No.

of

Res

pons

es

Incr

ease

Dec

reas

e

No.

of

Res

pons

es

Fixed pay levels 53% 0% 36 23% 0% 22 40% 0% 10 Variable pay levels 11% 44% 36 0% 18% 22 10% 10% 10 Total Compensation levels 19% 8% 36 5% 9% 22 30% 0% 10 Their pay linkages to function performance

25% 6% 36 29% 5% 21 22% 0% 9


8% 28% 36 10% 19% 21 10% 20% 10

Ease of attraction 8% 19% 36 0% 24% 21 10% 20% 10 Ease of retention 11% 25% 36 0% 14% 21 0% 30% 10 Note: “No change” option is not displayed in the table; therefore, the total may not equal 100%.


60 of 71


5.2. Steps Undertaken towards Fostering a Sound Risk Culture All regions and industries To create a sound risk culture a majority of the organizations are focusing on setting the right tone at the top of the organization (88%), penalizing misconduct and/or non-compliance behavior (93%), and utilizing the role of risk management in performance expectation setting and evaluation (89%). Rewarding positive risk behaviors and alignment of deferrals and risk time horizons are more prevalent in banking than insurance.

0% 20% 40% 60% 80% 100%

Evidence of setting the righttone at the top

Rewarding positive riskbehaviors

Penalizing misconduct and/ornon-compliance

Using a behavior-based hurdlefor qualifying to be eligible for

an incentive payment

Effective use of discretion inqualitative evaluation of

performance and behaviors

Training and coachingmanagers on sound risk

culture

Monitoring behaviors andcommunications

Role of risk management inperformance expectation

setting and evaluation

Deferrals and malus conditionsthat are properly aligned with

the risk time horizon ofdifferent businesses

To a Great Degree To Some Degree Not Taken


61 of 71


Steps Undertaken towards Fostering a Sound Risk Culture

To a Great Degree

To Some Degree

Not Taken

No. of Responses

Evidence of setting the right tone at the top 50% 38% 12% 68 Rewarding positive risk behaviors 24% 48% 27% 66 Penalizing misconduct and/or non-compliance 51% 42% 7% 69 Using a behavior-based hurdle for qualifying to be eligible for an incentive payment

13% 34% 52% 67

Effective use of discretion in qualitative evaluation of performance and behaviors

26% 57% 16% 68

Training and coaching managers on sound risk culture 38% 49% 13% 68 Monitoring behaviors and communications 34% 51% 15% 67 Role of risk management in performance expectation setting and evaluation

43% 46% 10% 67

Deferrals and malus conditions that are properly aligned with the risk time horizon of different businesses

32% 45% 23% 69


By region Steps Undertaken towards Fostering a Sound Risk Culture


To

a G

reat

D

egre

e

To

Som

e D

egre

e

No.

of

Res

pons

es

To

a G

reat

D

egre

e

To

Som

e D

egre

e

No.

of

Res

pons

es

To

a G

reat

D

egre

e

To

Som

e D

egre

e

No.

of

Res

pons

es

Evidence of setting the right tone at the top

46% 38% 37 60% 36% 25 33% 50% 6

Rewarding positive risk behaviors

29% 49% 35 24% 44% 25 0% 67% 6

Penalizing misconduct and/or non-compliance

53% 45% 38 56% 32% 25 17% 67% 6

Using a behavior-based hurdle for qualifying to be eligible for an incentive payment

14% 41% 37 12% 17% 24 17% 67% 6


22% 57% 37 36% 52% 25 17% 83% 6

Training and coaching managers on sound risk culture

35% 49% 37 48% 44% 25 17% 67% 6

Monitoring behaviors and communications

31% 47% 36 44% 48% 25 17% 83% 6

Role of risk management in performance expectation setting and evaluation

42% 50% 36 56% 32% 25 0% 83% 6


37% 50% 38 32% 44% 25 0% 17% 6

Note: 'Not taken' option is not displayed in the table; therefore, the total may not equal 100%.


62 of 71


By industry Steps Undertaken towards Fostering a Sound Risk Culture


Others

To

a G

reat

D

egre

e

To

Som

e D

egre

e

No.

of

Res

pons

es

To

a G

reat

D

egre

e

To

Som

e D

egre

e

No.

of

Res

pons

es

To

a G

reat

D

egre

e

To

Som

e D

egre

e

No.

of

Res

pons

es

Evidence of setting the right tone at the top

53% 36% 36 45% 45% 22 50% 30% 10

Rewarding positive risk behaviors

31% 51% 35 14% 48% 21 20% 40% 10

Penalizing misconduct and/or non-compliance

61% 36% 36 43% 48% 23 30% 50% 10

Using a behavior-based hurdle for qualifying to be eligible for an incentive payment

19% 36% 36 10% 33% 21 0% 30% 10


31% 56% 36 23% 59% 22 20% 60% 10

Training and coaching managers on sound risk culture

39% 47% 36 27% 64% 22 60% 20% 10

Monitoring behaviors and communications

36% 47% 36 24% 67% 21 50% 30% 10

Role of risk management in performance expectation setting and evaluation

43% 49% 35 36% 55% 22 60% 20% 10


39% 50% 36 26% 43% 23 20% 30% 10

Note: 'Not taken' option is not displayed in the table; therefore, the total may not equal 100%.


63 of 71

M

6.

6.1 All Theapp+15levecom

Imp

Sub

Low

Sim

Hig

Sub

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Mercer G

IMPA

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regions aere were noplicability. A5% for 42%els, with 36mpensation

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Global Fin

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act of R

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nancial S

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Services Dec

HE RA

aps on P

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Pay Leve

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ed Pay Levels

V

0%

0%

39%

42%

19%

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ensation

Markets in eased fixed

s have decs before th

o caps were

Variable PayLevels

22%

36%

36%

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this sectiond pay levelcreased thehe use of rae applied.

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9

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37


64 of 71


By region The impact of ratio caps on fixed pay levels is similar between Europe and North America. However, a greater proportion of North American organizations (78%) have decreased their variable pay levels compared to 56% of European organizations. Impact of Ratio Caps on Pay Levels


Fixed Pay

Levels

Variable Pay

Levels

Total Compensation

Levels

Fixed Pay

Levels

Variable Pay

Levels

Total Compensation

Levels

Substantially lower (-20% or more) than pre-caps

0% 24% 4% 0% 22% 0%

Lower (-5% to -15%) than pre-caps

0% 32% 0% 0% 56% 0%

Similar (+/- 5%) to pre-caps 36% 40% 88% 33% 22% 100%

Higher (+5 to +15%) than pre-caps

44% 4% 8% 44% 0% 0%

Substantially higher (+20% or more) than pre-caps

20% 0% 0% 22% 0% 0%

No. of Responses 25 25 26 9 9 9 Note: The total may not equal 100% due to rounding. There were not enough responses to show results for Growth Markets.


65 of 71


By industry The directional banking industry trends align with the overall analysis as banks are increasing their fixed pay levels (63%) and decreasing their variable pay levels (59%). Impact of Ratio Caps on Pay Levels

Banking Investment Management and Others

Fixed Pay

Levels

Variable Pay

Levels

Total Compensation

Levels

Fixed Pay

Levels

Variable Pay

Levels

Total Compensation

Levels


0% 25% 3% 0% 0% 0%


0% 34% 0% 0% 50% 0%

Similar (+/- 5%) to pre-caps

38% 41% 94% 50% 0% 75%


41% 0% 3% 50% 50% 25%


22% 0% 0% 0% 0% 0%

No. of Responses 32 32 33 4 4 4


6.2. Impact of the Ratio Caps on Amounts Deferred over Time Across all regions and industries deferred amounts have stayed similar when compared to pre-caps (64%) or decreased (30%). Deferral levels have remained more similar in Europe, while in North America they have decreased more. Impact of the Ratio Caps on Amounts Deferred over Time

All Regions

and Industries

Region Industry


Growth Markets



6% 4% 11% -- 7% 0%


24% 22% 33% -- 24% 25%

Similar (+/- 5%) to pre-caps 64% 70% 44% -- 62% 75%


6% 4% 11% -- 7% 0%


0% 0% 0% -- 0% 0%




66 of 71


6.3. Impact of the Ratio Caps on Firm Staffing Levels

Staffing levels have not been impacted due to the ratio caps, with 94% of organizations reporting similar levels. Impact of the Ratio Caps on Firm Staffing Levels

All Regions

and Industries

Regions Industry


Growth Markets



0% 0% 0% -- 0% 0%


6% 9% 0% -- 7% 0%

Similar (+/- 5%) to pre-caps 94% 91% 100% -- 93% 100%


0% 0% 0% -- 0% 0%


0% 0% 0% -- 0% 0%


6.4. Impact of the Ratio Caps on Firm Compensation and Benefits Costs

All regions and industries Ratio caps are not affecting organizations’ compensation and benefits costs for the most part. If compensation and benefits are being affected, they are only slightly lower or higher than pre-cap levels across all industries and regions.

Impact of the Ratio Caps on Firm Compensation and Benefits Costs

Firm Compensation Costs (Absolute)

Firm Benefits Costs (Absolute)

Firm Compensation and Benefits Costs as

a Percent of Revenues


0% 0% 0%

Lower (-5% to -15%) than pre-caps 3% 3% 3%

Similar (+/- 5%) to pre-caps 88% 94% 88%

Higher (+5 to +15%) than pre-caps 9% 3% 9%


0% 0% 0%

No. of Responses 34 34 34


67 of 71


By region Impact of the Ratio Caps on Firm Compensation and Benefits Costs


Firm

Com

pens

atio

n C

osts

(A

bsol

ute)

Firm

Ben

efit

s C

osts

(A

bsol

ute)

Firm

Com

pens

atio

n an

d B

enef

its

Cos

ts a

s a

% o

f R

even

ues

Firm

Com

pens

atio

n co

sts

(Abs

olut

e)

Firm

Ben

efit

s co

sts

(Abs

olut

e)

Firm

Com

pens

atio

n an

d B

enef

its

Cos

ts a

s a

% o

f R

even

ues

Substantially lower (-20% or more) than pre-caps 0% 0% 0% 0% 0% 0%

Lower (-5% to -15%) than pre-caps 3% 3% 3% 3% 0% 0%


Higher (+5 to +15%) than pre-caps 9% 3% 9% 9% 0% 12%

Substantially higher (+20% or more) than pre-caps 0% 0% 0% 0% 0% 0%

No. of Responses 34 34 34 34 8 8 There were not enough responses to show results for Growth Markets.

By industry Across industry segments, the majority of firms’ compensation and benefits costs remain similar to pre-cap costs. Impact of the Ratio Caps on Firm Compensation and Benefits Costs


Firm

Com

pens

atio

n C

osts

(A

bsol

ute)

Firm

Ben

efit

s C

osts

(A

bsol

ute)

Firm

Com

pens

atio

n an

d B

enef

its

Cos

ts a

s a

% o

f R

even

ues

Firm

Com

pens

atio

n C

osts

(A

bsol

ute)

Firm

Ben

efit

s C

osts

(A

bsol

ute)

Firm

Com

pens

atio

n an

d B

enef

its

Cos

ts a

s a

% o

f R

even

ues

Substantially lower (-20% or more) than pre-caps 0% 0% 0% 0% 0% 0%

Lower (-5% to -15%) than pre-caps 3% 3% 3% 0% 0% 0%


Higher (+5 to +15%) than pre-caps 7% 0% 3% 25% 25% 50%

Substantially higher (+20% or more) than pre-caps 0% 0% 0% 0% 0% 0%

No. of Responses 30 30 30 4 4 4 Note: The total may not equal 100% due to rounding.


68 of 71


7. ROLE BASED ALLOWANCES

7.1. Prevalence of Role-based Allowances Over 57% of banking organizations have role-based allowances in place for 2015 and an additional 6% are planning to introduce them. Very few organizations that implemented role-based allowances are now planning to eliminate them (4%) across all regions and industries. The insurance organizations generally do not have role-based allowances in place and have no plans to introduce in the future. Prevalence of Role-based Allowances

All Regions

and Industries

Region Industry


Growth Markets


and Others

No role-based allowances in place and not planning to introduce

45% 40% 50% 75% 31% 85% 43%

Role-based allowances in place for 2015

45% 51% 44% 0% 57% 15% 43%

Implemented role-based allowances, but now planning to eliminate in 2016

4% 6% 0% 0% 6% 0% 0%

Planning to introduce role-based allowances in 2016

5% 3% 6% 25% 6% 0% 14%

No. of Responses

55 35 16 4 35 13 7



69 of 71


7.2. Prevalence of Changes Planned to Role-Based Allowances Design

Approximately one-fourth of the banking organizations are making changes to their role-based allowance program design. About two-thirds of European and North American organizations are not planning to change their role-based allowance design. Prevalence of Changes Planned to Role-Based Allowances Design

All Regions

and Industries

Region Industry


Growth Markets


and Others

No changes planned

61% 64% 62% -- 58% 100% 50%

Changes planned 19% 23% 12% -- 25% 0% 0%

No changes planned until after consultation with national regulator

19% 14% 25% -- 17% 0% 50%

No. of Responses

31 22 8 1 24 3 4



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7.3. Changes Planned to Role-Based Allowances Design Those organizations that are planning to make changes to their role-based allowances design are primarily shifting from role-based allowance to ordinary base salary (38%), decreasing eligibility for role-based allowances (23%), unifying level/amount for MRTs with the same role (23%), and changing the vehicle from equity to cash (23%). The changes are being driven by banking organizations in Europe. Changes Planned to Role-Based Allowances Design

All Regions

and Industries

Region Industry


Growth Markets


and Others

Decrease eligibility for role-based allowances

23% 27% -- -- 18% -- --

Shift from role-based allowance to ordinary base salary

38% 45% -- -- 36% -- --

Shift from role-based allowance to base salary with different payout cycle

0% 0% -- -- 0% -- --

Unify level/amount for MRTs with the same role

23% 18% -- -- 18% -- --

Decrease level/amount of role-based allowances

15% 18% -- -- 18% -- --

Increase level/amount of role-based allowances

8% 9% -- -- 9% -- --

Vehicle: from cash to equity

0% 0% -- -- 0% -- --

Vehicle: from equity to cash

23% 18% -- -- 27% -- --

Defined timeframes for role-based allowances

15% 9% -- -- 9% -- --

Payout schedule 15% 18% -- -- 18% -- --

Forfeiture features

8% 0% -- -- 9% -- --

No. of Responses

13 11 1 1 11 1 1

Note: Some organizations may have indicated more than one answer; therefore the total may exceed 100%.


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MERCER GLOBAL FINANCIAL SERVICES EXECUTIVE … · Mercer Global Financial Services Executive Compensation Snapshot Survey December 2015 party for any decision made or action taken