SAN JOSE, Calif., Sept. 24 /PRNewswire-FirstCall/ -- The economic crisis over the last year has rekindled debate on the most appropriate form of long-term equity incentives for executives, as shareholders call for closer links between executive pay and performance than what's offered by traditional stock options or time-vested restricted stock. According to new research from Aon Consulting's Radford, a leading provider of compensation intelligence to the technology and life sciences industries, Relative Total Shareholder Return (TSR) plans, in which the payout of equity awards are linked to the company's stock price return versus a set of comparator companies or index, are gaining popularity for their ability to ease long-term performance goal setting, maintain employee motivation and address shareholder alignment concerns.

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"The market has made great progress toward performance-based equity compensation over the past few years," says Brett Harsen, vice president, Radford. "But unfortunately many are finding that the inability to set long-term performance goals that both maintain employee motivation and satisfy shareholders is the fatal flaw for these well-intentioned programs."

Recently published market analysis from Radford indicates that more than 250 companies have incorporated Relative TSR into their incentive programs through August 2009, including 36 in the Fortune 100 and 77 in 2009 alone. Notably, the technology sector has seen Intel, Hewlett-Packard, Motorola, and Yahoo! all adopt Relative TSR plans in 2009, based on their most recent annual reports.

"Executive compensation is under great scrutiny and required disclosure of confidential strategic performance goals has prevented many companies from adopting performance-based long-term incentives," says Matt Ward, senior vice president, Radford. "Relative TSR plans provide a crystal clear and purely objective link to shareholder returns and performance measurement."

Radford's market research also shows that Relative TSR shares provide a significantly better return on investment, such that the ratio of compensation delivered divided by the compensation expense accrued under FAS 123(R) is maximized with Relative TSR, as compared to both stock options and time-vested restricted stock. Further, Relative TSR is a less volatile and more predictable compensation delivery vehicle, while continuing to provide critical motivation and retentive incentives.

While the vast majority of companies that have implemented Relative TSR plans have done so for executives only, Radford believes that there is greater potential for Relative TSR to be applicable to broad-based equity programs.

"To truly value and appreciate your equity grants, the performance must be measurable and transparent," says Terry Adamson, senior vice president, Radford. "Relative TSR allows for easy measurement of performance using company stock price, while relative competitive rank can be communicated, even on a daily basis, to serve as a frequent reminder of the need to outperform your competition."

As more organizations explore Relative TSR, chief challenges for design and implementation include peer group selection, administration and employee communication. Radford has unveiled its analytics and solutions tools, including proprietary statistical analyses to assess the quality of peer groups and daily trackers to communicate performance versus peers to plan participants in real time.

Additional information and summaries of Radford's research on Relative TSR plans are found at www.RelativeTSR.com.

About Radford

For more than 30 years, Radford has provided compensation market intelligence to the technology and life sciences industries. Global survey databases, which include 3.5 million incumbents, offer current, reliable data to 2,000+ clients. Leveraging Radford survey data, our thought-leading global Radford Consulting team creates tailored solutions for the toughest global business and compensation challenges facing companies at all stages of development. In addition to our consulting team, we also offer equity valuation assistance via Radford Valuation Services, and leading-edge market analyses and survey services with Radford Analytic Services. Radford's suite of global surveys includes the Benchmark, Executive, Sales, Benefits, Global Life Sciences and International Surveys.

About Aon Consulting

Aon Consulting is among the top global human capital consulting firms, with 2008 revenues of $1.358 billion and more than 6,300 professionals in 229 offices worldwide. Aon Consulting works with organizations to improve business performance and shape the workplace of the future through employee benefits, talent management and rewards strategies and solutions. Aon Consulting was named the best employee benefit consulting firm by the readers of Business Insurance magazine in 2006, 2007 and 2008. For more information on Aon, please visit www.aon.mediaroom.com.

About Aon

Aon Corporation (NYSE: AOC) is the leading global provider of risk management services, insurance and reinsurance brokerage, and human capital consulting. Through its more than 37,000 colleagues worldwide, Aon readily delivers distinctive client value via innovative and effective risk management and workforce productivity solutions. Aon's industry-leading global resources and technical expertise are delivered locally through more than 500 offices in more than 120 countries. Named the world's best broker by Euromoney magazine's 2008 and 2009 Insurance Survey, Aon also ranked highest on Business Insurance's listing of the world's largest insurance brokers based on commercial retail, wholesale, reinsurance and personal lines brokerage revenues in 2008. A.M. Best deemed Aon the number one insurance broker based on brokerage revenues in 2007 and 2008, and Aon was voted best insurance intermediary, best reinsurance intermediary and best employee benefits consulting firm in 2007 and 2008 by the readers of Business Insurance. For more information on Aon, log onto http://www.aon.com/.

    For more information, contact:
    Fabiola A. Price, 408.321.2653, fprice@radford.com
    Kelly St. Denis, 408.321.2584, kstdenis@radford.com

SOURCE Aon Corporation