Retail CEO bonuses increasingly rewarding innovation and planning

23 August 2019 2 min. read

Nearly 20% of retail companies are rewarding CEOs for planning and evolving strategic priorities, finds a new report from HR consultancy Korn Ferry.

Ecommerce has forced brick-and-mortar stores to evlove into consumer-focused, omni-channel, and tech-powered firms – or else perish.

The shifting environment means that CEOs are increasingly being rewarded for innovation and planning – which is critical to retailer survival – as opposed to simple annual profit goals, according to a Korn Ferry survey of 68 North American retailers with media annual sales of $6.6 billion.

Though company profitability remains the top performance metric on which CEOs are judged, 17% of companies now use planning and evolving strategic priorities as a key measure of CEO success, according to the report.

Retail CEO bonuses increasingly rewarding innovation and planning

“As few as two years ago, strategic planning objectives were not in the mix of what retail CEOs’ bonuses were based upon,” Craig Rowley, Korn Ferry senior partner and retail expert, said. “But now it’s absolutely critical that CEOs formulate plans today to guide their companies and tailor their offering to best suit customers, embrace technology such as AI, and create seamless e-commerce channels. If this isn’t happening, retailers will not survive.”

The report found that companies have increased the percentage of target bonuses to further incentivize leaders to achieve company goals. Target bonuses increased from a median 100% of base salary a few years ago to a median of 150% in 2019.

The average retail executive bonus payout was 75% of target. Thirty-seven percent of retail CEOs had payouts of at least 100% of their targeted bonus, up from 29% in 2018 and 15% in 2017.

Korn Ferry research from earlier this year found that CEO compensation increased 5.8% at the largest US companies. The lion’s share of total direct compensation (TDC) increases for CEOs came from performance-based compensation growth, including bonuses and long-term incentives (LTIs). Annual bonuses increased by 3.9% to a median of $2.6 million, while LTIs jumped a significant 6.8% to a median $10 million.