PERFORMANCE CONTINUED We found that within sectors such as utilities and basic materials all companies report on non-financial KPIs, which is likely to be reflective of their need to manage impacts on society. However, other sectors such as consumer goods and financial services have yet to identify non-financial indicators as fundamental to group strategy or driving increasing future value for the company. For issues such as environment and safety, performance data is often more robust and objective, however measures such as employee engagement and customer satisfaction are less so, and are open to interpretation. Moving forward, the balance between financial and non-financial KPIs will need to improve, as the investor and stakeholder communities demand further insight and evidence of how a company’s impacts and performance are interrelated. remuneration and KPIs, up from 30% last year. Less than half of those present a clear and specific link to financial KPIs, and even fewer consider non-financial measures. The utilities sector has once again performed well in this area with 100% of the companies discussing a link between the KPIs and remuneration. It is interesting to note that only 4% of financial services companies show a link between KPIs and remuneration. With executive remuneration remaining in the spotlight, it is important for management to rebuild trust with stakeholders by presenting the remuneration policy as linked to the successful performance against the company strategy. Figure 8.8 Challenge of linking KPIs Remuneration has become more and more of interest to investors, as during the financial crisis, the topic of executive remuneration became highly discussed and publicised. This increased focus on management compensation and bonuses seems to have had an impact on the Annual Report, with 39% of companies now demonstrating a link between Figure 8.6 Figure 8.4 How many companies disclose financial KPIs? 91% 93% How many companies disclose non-financial KPIs? Companies demonstrating a link between remuneration and KPIs: 85% 77% 69% 56% 43% 58% 59% 66% 39% 30% 8% 22% ’09 14% 25% Specific link Basic link 31% 12% 19% ’08 ’10 Figure 8.5 How many financial KPIs are being identified by companies? ’06 ’07 ’08 ’06 ’07 ’08 ’09 ’10 ’09 ’10 Figure 8.7 How many non-financial KPIs are being identified by companies? • • • • 30 1 to 3 4 to 6 7 to 9 10+ 12% 44% 27% 17% • • • • 1 to 3 4 to 6 7 to 9 10+ 59% 32% 5% 4% © Black Sun Plc 2011 www.blacksunplc.com
