European listings have made a remarkable comeback in 2024, indicating that more companies view the current market condition as an optimal listing window. We anticipate that the European listings market in 2025 will be shaped by several key factors, including stabilizing equity capital markets; continued focus of corporates on divestment of noncore business units and the pent-up demand of maturing private equity (PE) -backed investments.
Against this backdrop, we look at executive compensation trends from recent European listings (private company and PE-backed initial public offering (IPOs) and corporate spinouts) to consider what factors are relevant when it comes to incentivising the executive team on going public.
We looked at companies that listed on the BME, Euronext, First North Stockholm, Nasdaq (Copenhagen and Stockholm), Oslo Stock Exchange and Six Swiss Exchange between January 2017 and March 2024. We found some interesting observations on legacy and one-off awards for executive directors on listing. Post-listing and ongoing remuneration should be considered against the broader European executive compensation landscape. Please refer to our publications 2024 AGM trends in Europe: Analysis of Executive Director remuneration policies and shareholder feedback and Navigating the European executive compensation landscape for more details on ongoing executive remuneration trends.
For our analysis on European on-listing awards to the executive team, we’ve reviewed publicly available disclosures in listing prospectuses on admission for the 19 companies in our sample listing in the last seven years. The 19 companies covered a wide range of market capitalisations (€20 million - €42 billion).
We also observed a range of ownership structures across our sample including those that prior to listing were majority owned by founding shareholders or private equity investors; those that had a mix of ownership with no single majority holding and those that on listing were spun out of majority corporate holdings.
In terms of incentivising executive directors on a listing, we typically observed legacy, contingent awards and “plug the gap” incentive awards. We define:
Granting on-listing awards can provide a benefit to the company, the executive team and the new broader shareholder base. For the company, on-listing awards can be a tool to motivate and retain key talent through a time of transformation. These types of awards are also very important when a company is seeking to attract key talent close to the listing date who are essential to the future success of the newly public company. For executives, they can show how much they helped the company go public. They can also give them a first or better chance to become owners of the company. For shareholders, on-listing awards provide longer-term alignment between the interests of management and shareholders.
On listing, awards to the executive team won’t be present in every scenario and in our sample of those companies that disclosed details of one-off awards to executive directors, 53% made awards to CEOs.
Just as the rationale for going public depends on a variety of factors, so is the existence of on-listing awards dependent on a range of different factors, including:
To bring these different factors to life, we have presented below some example scenarios that may or may not give rise to on-listing awards being granted to executives.
PolyPeptide Group AG is a leading pharmaceutical active ingredient manufacturing company, with headquarters in Switzerland, listed on Six Swiss Exchange in 2021. On top of the Company’s preexisting incentives, on IPO, two one-off restricted share awards were granted to the CEO as compensation for the forfeited remuneration from their previous employer. The first award had a value of CHF750,000 and the second award had a value of CHF100,000. The first award was subject to three years’ service and vested in thirds each year from June 2022. The second award was subject to just one years' service and vested in June 2022.
We will continue to observe the impact of macroeconomic and geopolitical conditions on the European listings market. From an executive compensation perspective, while ongoing pay design practices will remain broadly consistent with market norms, we continue to expect to see varied practice when it comes to valuable legacy, contingent awards and “plug the gap” incentive awards in the hands of executive directors depending on the factors present in each situation.
A listing is a significant commercial milestone that offers the opportunity to review and align legacy executive compensation arrangements with the interests of both executives and public company investors. With public ownership comes increased scrutiny from regulators, proxy advisors, the media and other stakeholders. We’re well-equipped to support organizations in key areas as they prepare for listing:
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Details of both existing and future remuneration arrangements are required as part of the listing prospectus disclosures. These disclosures necessitate careful coordination between external advisors (remuneration advisors, lawyers, investment banks) and internal departments (HR, accounting, legal, treasury, tax) to ensure accurate and comprehensive preparation.
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After a company is listed, shareholders can give direct feedback on how executives are paid. They can do this through both binding and advisory votes at the Annual General Meeting. Given the heightened corporate governance standards for public companies, newly listed organizations must consider executive remuneration in the context of investor interests and market expectations.
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Listing introduces additional responsibilities in areas such as investor relations, finance and legal. Companies need to recruit or promote individuals with appropriate compensation packages that reflect these enhanced roles and functions.
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Most newly listed companies implement new equity incentive plans to grant awards to key employees and directors. These plans should incentivize participants to achieve the business strategy through challenging performance metrics, while also incorporating market practices and investor guidelines.
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Upon listing, the company’s board will include independent non-executive directors (NEDs). These NEDs will be compensated differently from executive directors, and the company will need to design appropriate fee structures for these individuals.
Setting, managing and communicating executive pay is increasingly sensitive. Executive pay programs are more complex and subject to closer scrutiny than ever before. WTW provides expert perspectives and consulting to help companies balance talent and governance risks and drive business performance. We collaborate with management and boards to align the interests of key stakeholders and develop pay arrangements that withstand scrutiny from shareholders, regulators and other stakeholders.
