Relative Total Shareholder Return (TSR)
Awards in Long-Term Incentive Plans (LTIPs):
Key Design Decisions and Trade offs
Align executive pay with shareholder outcomes – and understand the levers that drive TSR plan results.
Relative TSR remains one of the most popular and effective ways for boards to ensure executive pay-for-performance alignment for investors, but only if the design is robust and the pay-out potential is well understood through the award’s lifecycle. This guide is about giving organisations the practical tools and data they need to get that design right.
- Keaton Hoffman, Partner Executive Compensation at Aon
This in-depth guide, Relative TSR Awards in LTIPs: Key Design Decisions and Trade-offs, is for boards and remuneration/compensation committees, HR and reward leaders, and investor relations teams who need to design, defend, or refresh relative Total Shareholder Return (TSR) based long-term incentive plans, and it goes beyond high-level commentary to offer a practical, data rich framework for designing and governing relative TSR plans that are fair, competitive, and well-reasoned.
What’s Inside the Relative TSR Awards Guide?
A structured framework for six key TSR design decisions
The guide walks through six core choices that materially affect both perceived fairness and realised payouts:
- Comparator choice – index vs custom peers
- Payout schedule and regional norms (UK vs EMEA vs US)
- Dividend treatment – reinvested vs accumulated
- TSR measurement – averaging periods vs spot prices
- Currency choice – local vs common currency
- Peer group size – the hidden driver of payout stability
Data driven insights on Relative TSR Plan Outcomes
Design levers play out in practice, including:
- Regional snapshots for comparator choice, payout ranges, averaging and dividend treatment in EMEA and the US
- Peer group size vs average payout analysis, showing how outcomes change from very small to very large peer sets
- Examples of common pitfalls – for example, under‑estimating the impact of Foreign Exchange in global peer groups
From plan design to operational delivery and governance
The guide then moves from “what” to “how”, comparing:
- In‑house calculation and tracking
- Outsourcing to a consulting firm
- Leveraging technology, such as Aon’s PeerTracker platform, to improve transparency, auditability and participant understanding
Actionable takeaways for decision‑makers
Finally, you’ll get a concise set of takeaways to support board, committee and leadership discussions on how to refine, defend or redesign your relative TSR plans.
Download the Guide on Relative TSR Awards in LTIPs
The guide combines survey findings, empirical analysis and practical examples to help you move beyond general principles and into concrete design choices that stand up under scrutiny from boards, auditors, shareholders and proxy advisors.
By downloading this guide, you will be able to:
- Assess how your current relative TSR design against market practice
- Explore how specific levers (e.g. averaging, currency, peer size) will impact payouts
- Strengthen your narrative with boards, executives, and investors on why your plan design is fair, credible, and aligned with shareholder outcomes.
Make relative TSR a strategic tool for reward and governance Complete the form to access the full guide and see how organisations are evolving relative TSR to balance competitiveness, risk, and stakeholder confidence in today’s markets.
