CEO MOTIVES PROF DR XAVIER BAETEN

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2 CEO MOTIVES PROF DR XAVIER BAETEN

3 WHAT S IN THIS STUDY? STRUCTURE OF THE QUESTIONNAIRE Corporate governance Work environment Work engagement Financial rewards Ambition Ethics & sustainability

4 1WHO ARE WE TALKING ABOUT? THE SAMPLE

5 NUMBER OF RESPONDENTS GEOGRAPHY ; 42% 546; 58% Netherlands Belgium

6 Number of respondents ORGANIZATION TYPE

7 ORGANIZATION SIZE Number of employees (FTE) >500; 153; 16% 0-50; 282; 30% ; 305; 33% ; 201; 21%

8 CEO TYPOLOGY: GENDER, OWNERSHIP Gender CEO owner? 93; 10% 127; 13% 483; 51% 340; 36% 857; 90% Male Female Sole shareholder No CEO ownership Co-owner

9 CEO TYPOLOGY: AGE, SENIORITY Age Years in current role <45 y y >55 y 0 <5 y 5-12 y >12 y

10 STRUCTURE Satisfaction Work engagement CEO drivers Financial rewards Ethics

11 2HOW SATISFIED ARE CEOS? A TOTAL REWARDS PERSPECTIVE

12 FIRST OF ALL: WHAT ABOUT THE RELATIONSHIP WITH THE BOARD? Corporate governance item Male Female The board adds value to the company s strategy 3,9 3,8 The board provides relevant contacts 3,3 3,2 Climate of trust with the board 4,5 4,2 Collaboration with board in a mutually respectful way 4,5 4,4 Feedback from the board is objective and reliable 4,1 3,8 I feel supported by the board 4,3 4,1

13 NON-FINANCIAL REWARDS: WHAT ARE WE TALKING ABOUT? Overall climate Collaboration with senior mgt/board Recognition Outside view on organisation Developing management skills Work progress Social relevance Pride Acceptance of change Innovation attitude Challenge Ethical standards Clear & challenging objectives Values alignment Travel Workplace location

14 NON-FINANCIAL REWARD SATISFACTION Highest score Lowest score Pride Acceptance of change Ethical standards Travel Values alignment Targets Challenge Collaboration senior mgt

15 3HOW ENGAGED ARE CEOS?

16 WORK ENGAGEMENT 1 Never 2 Almost never 3 Rarely 4 Sometimes 5 Often 6 Very often 7 Always Schaufeli, Bakker, Salanova

17 WORK ENGAGEMENT & SENIORITY 1 Never 2 Almost never 3 Rarely 4 Sometimes 5 Often 6 Very often 7 Always 17

18 4WHAT DRIVES CEOS?

19 Standardized beta WHAT DRIVES CEOS? 0,5 0,4 0,3 0,2 0,1 0-0,1

20 Standardized beta WHAT DRIVES CEOS? NETHERLANDS VERSUS BELGIUM 0,5 NL B 0,4 0,3 0,2 0,1 0-0,1

21 NON-FINANCIAL REWARDS: WHAT ARE WE TALKING ABOUT? Overall climate Collaboration with senior mgt/board Recognition Outside view on organisation Developing management skills Work progress Social relevance Pride Acceptance of change Innovation attitude Challenge Ethical standards Clear & challenging objectives Values alignment Travel Workplace location

22 WHICH NON-FINANCIAL REWARDS DRIVE CEOS WORK ENGAGEMENT?

23 WHAT IS UNIMPORTANT?

24 5IS IT ALL ABOUT THE MONEY?

25 FINANCIAL REWARDS - TOPICS Financial reward satisfaction Financial reward design Variable remuneration Financial reward benchmarking Financial reward governance Remuneration committee

26 FINANCIAL REWARD SATISFACTION Highest scores Well informed concerning the system that determines my variable remuneration Lowest scores Remuneration in relation to a similar position in the market Remuneration in relation to the work done Remuneration reflecting contribution to the organisation Remuneration being justified given performance Objectivity of remuneration process

27 FINANCIAL REWARD DESIGN VARIABLE REMUNERATION? % granting variable remuneration 90% 89% 80% 70% 60% 46% 71% 52% 57% 53% 58% 64% 50% 40% 30%

28 FINANCIAL REWARD DESIGN KPIS UNDERLYING VARIABLE REMUNERATION Accounting 93% Efficiency/quality 32% Innovation Customer-related Employee-related Market share 21% 19% 18% 15% Share price Environment 4% 7% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

29 FINANCIAL REWARD BENCHMARKING Three-yearly 4% Two-yearly 6% Yearly 13% Ad hoc 23% No benchmarking 42% Don't know 12% 19% structural benchmarking

30 FINANCIAL REWARD BENCHMARKING Structural benchmarking No structural benchmarking Variable pay satisfaction (PS) 4,2 3,9 Remuneration in relation to similar position in the market (DJ) Remuneration reflects contribution to organisation (DJ) Impact on outcome of remuneration processes (PJ) 3,8 3,6 4,0 3,7 3,6 3,9

31 FINANCIAL REWARD GOVERNANCE REMUNERATION COMMITTEE Remuneration committee; 28% No remuneration committee; 72%

32 FINANCIAL REWARD GOVERNANCE REMUNERATION COMMITTEE Reward characteristic Remco No remco Benchmarking 37% 12% Variable pay 74% 53% Criteria variable pay: financial + nonfinancial 49% 25%

33 FINANCIAL REWARD GOVERNANCE REMUNERATION COMMITTEE Satisfaction Pay satisfaction Distributive justice Procedural justice Remco No remco

34 6LAST BUT NOT LEAST: ETHICS & SUSTAINABILITY

35 CSR is like teenage sex: everybody says they are doing it, but few actually are. And those who do it, do it rather badly.

36 ETHICS & SUSTAINABILITY CEO OPINIONS Business has responsibility to society apart from profit Law is not enough CSR = image builder Performance = dependent on stakeholder engagement CSR = effective basis for competing Main rationale of business = value to society Somewhat disagree Neither agree nor disagree Somewhat agree Totally agree

37 ETHICS & SUSTAINABILITY DECISIONS BY CEOS

38 ETHICS & SUSTAINABILITY SCENARIO 1 60% 58% 50% 40% 35% 30% 20% 10% 2% 5% 0% Do nothing Do nothing & client should not find out Stop practice & sharpen ethical policies Consider sanctions & inform clients

39 ETHICS & SUSTAINABILITY SCENARIO 2 60% 52% 50% 40% 30% 24% 21% 20% 3% 10% 0% Switch Switch but ask to adhere to legal requirement Renegotiate (even if this results in higher prices) Reject

40 HOW ETHICAL ARE CEOS? 69% 70% 60% 50% 40% 31% 30% 20% 10% 0% Unethical choice Ethical choice

41 HOW ETHICAL ARE CEOS? Gender Age CEO shareholder NL/B Organization type Firm size Board Variable remuneration

42 HOW ETHICAL ARE CEOS? PERSONAL CHARACTERISTICS Characteristic Categories More ethical? Gender Female x Age 45 y y >55 y CEO shareholder No CEO ownership x NL/B Netherlands x x x

43 HOW ETHICAL ARE CEOS? FIRM CHARACTERISTICS Characteristic Categories More ethical? Organization type Family business Listed firm Private equity-owned Board Board x Firm size Variable remuneration 0-50 emp emp emp >250 emp Also non-financial KPIs x x x x

44 7A SHORT (PERSONAL) SYNTHESIS TO CONCLUDE

45 PERSONAL SYNTHESIS (1) Our CEOs feel well: Ambition Engagement Satisfaction with their work environment Points of attention: Board providing relevant contacts Performance management (target setting) Change and/in the organization Market alignment of pay Pay setting process

46 PERSONAL SYNTHESIS (2) Female CEOs: Trust/support by board Importance of climate and collaboration with senior management Take more ethical decisions Remuneration committee: More professional reward practices (variable pay, benchmarking) But no impact on pay satisfaction and/or fairness

47 PERSONAL SYNTHESIS (3) Ethics & sustainability: Ethical standards play a role (work engagement) CSR = image builder Important differences, depending on: Gender, age, nationality, firm size/type, But also

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49 THANK YOU!