Heiton Holdings
Tailoring executive reward to create shareholder value
PA was commissioned to assist the Heiton Holdings Board to design and implement an appropriate executive remuneration system. The two fundamental criteria for this were that it should:
- Ensure that the executives were properly rewarded
- Act as an effective motivator to improve the performance of the business, in shareholder value terms.
Working to Heiton's prime objectives – which included the attraction and retention of the right caliber of senior personnel as well as the creation of enhanced shareholder value – the PA team’s first objective was to analyze the company’s current situation. On the basis of this investigation we were able to draw up a proposal for the company’s Remuneration Committee which:
- Reviewed the strengths and weaknesses of the existing configuration of base salaries and bonuses
- Set stretching targets for the performance of the business, based on the three year Group strategic plan. These targets were verified relative to the external expectations for the company (eg stockbroker, analysts)
- Specified a redesigned bonus scheme to ensure that executive reward was linked to value created – either within the group overall or within specified business units.
Following the initiatives taken within the business, and the implementation of PA’s proposals, the company is well on the way becoming the best performer in its sector, and its performance is in the upper quartile of the market over the past three years (that is, since the scheme was introduced) measured in Total Shareholder Return terms.
“I can totally support the new remuneration scheme put in place within Heitons with the assistance of PA. It is fundamentally different to the scheme we had in place previously, although I would say the scheme we had then is still in common practice elsewhere today. The scheme has helped us to focus on what is important for the business, and aligns the interests of the shareholders with the interests of the managers. With PA’s assistance, we are now rolling the scheme out to the top three tiers of management, and we expect this will add further impetus to improving the performance of Heitons in a very challenging business environment.”
Leo Martin
Group Chief Executive Officer
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