article thumbnail

Designing CEO Pay to Drive "Good" Behavior

Harvard Business Review

If CEOs are going to operate for stakeholder value — rather than just for shareholder value — then their pay ought to be structured in a way that supports them doing so. For long-term incentive plans, the dominant measure is total shareholder return (TSR). The primary measurement it uses in its recommendation on each company's advisory 'say on pay' vote is the movement of the CEO's pay in relation to the company's one- and three-year TSR.

article thumbnail

Corporate Purpose: Monumental Change Starts With Your Leadership

CO2

After all, your business’s future success depends not only on the health and longevity of the community in which you operate — but also on the health of our entire world. greater annualized total shareholder return (TSR). higher operating profitability.

Insiders

Sign Up for our Newsletter

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

article thumbnail

How This Lingerie Store Boosted its Bottom Line, Despite the Downturn

Harvard Business Review

For instance, when customers expressed a desire for more time with sales associates, Journelle reorganized its operations and stripped away all non-customer facing activities (e.g. The findings revealed that a group of companies emerged with higher total shareholder return (TSR) than their peers post-recession. Customers Recession Retail TSRJournelle in New York City is no ordinary store.

article thumbnail

CEOs Must Model the Behavior for Creating Societal Value

Harvard Business Review

He changed "Market Total Shareholder Return" (M-TSR)" to "Operating Total Shareholder Return (O-TSR)." M-TSR measured the market return to shareholders based on the stock price appreciation plus dividends over a three-year period. O-TSR measured three elements associated with the long-term improvement in the value of the business: sales growth, profit margin improvement, and increase in capital efficiency.

TSR 15
article thumbnail

Should a CEO’s Bonus Be Based on Financial Performance Alone?

Harvard Business Review

Other firms have ventured down this path, including the conglomerate Wesfarmers , with its 200,000-plus staff, and the global hospital operator Ramsay Health Care. ” In 2012 the Commonwealth Bank restructured its evaluation system so that 75% of CEO incentives came from the bank’s total shareholder return (TSR), relative to a set peer group, and 25% from customer-satisfaction results, benchmarked against another peer group.

TSR 9
article thumbnail

Don't Blame Your Company's Poor Performance on Its Industry

Harvard Business Review

Indeed, our study shows that the biggest variations in TSR are not between industries but within them. But the TSR variations of companies within these industries were far greater: 44 percentage points in tobacco and 69 percentage points in computers and peripherals. In our analysis of companies that generate a top-quartile TSR within their industry, two data points stand out. Second, top-quartile companies operate more profitably than other companies.

TSR 8
article thumbnail

How This Lingerie Store Boosted its Bottom Line, Despite the Downturn

Harvard Business Review

For instance, when customers expressed a desire for more time with sales associates, Journelle reorganized its operations and stripped away all non-customer facing activities (e.g. The findings revealed that a group of companies emerged with higher total shareholder return (TSR) than their peers post-recession. Journelle in New York City is no ordinary store.

TSR 15