01—Abstract
Summary
Summary of the 8-K filed January 4, 2021. Cited figures are marked; the original filing is the authoritative source.
Mastercard Inc. filed an 8-K on January 4, 2021, detailing adjustments made by its Human Resources and Compensation Committee (HRCC) to executive incentive compensation for 2020 and a portion of performance stock units (PSUs) vesting in 2021.
These adjustments were made in response to the significant impact of the COVID-19 pandemic on the Company's financial performance and operating environment. The HRCC modified performance targets for both the 2020 Annual Incentive Awards and the 2018 PSU Awards to better reflect performance within management's control, excluding impacts from decreases in Personal Consumption Expenditure (PCE) and cross-border travel, as well as certain pandemic-related expense savings. Crucially, the maximum payout for both award types was capped at the target amount, ensuring a compensation outcome for 2020 that is lower than the preceding three years and aligning executive rewards with stockholder interests during an unprecedented period.
02—Key points
Key Highlights
- Mastercard's HRCC adjusted 2020 annual incentive awards and 2018 PSU awards due to the COVID-19 pandemic's impact.
- Performance targets were modified to exclude uncontrollable factors like decreased Personal Consumption Expenditure (PCE) and cross-border travel.
- Certain pandemic-related expense savings were also excluded from performance calculations.
- Maximum payouts for both 2020 Annual Incentive Awards and 2018 PSU Awards were capped at the target payout amount.
- The adjustments are intended to ensure compensation accurately reflects performance within management's control and retains key talent.
- The resulting compensation outcome for 2020 is expected to be lower than in the three years prior to the pandemic.
- The Company's one-year TSR was 20% (68th percentile of S&P 500) and three-year TSR was 140% (94th percentile of S&P 500) as of December 31, 2020.
03—Questions
Frequently Asked Questions
Why did Mastercard adjust executive compensation targets?
Mastercard adjusted executive compensation targets due to the significant and largely uncontrollable impact of the COVID-19 pandemic on its financial performance and operating environment. The goal was to ensure that compensation reflected performance reasonably within management's control and to retain key talent.
What specific items were excluded from performance targets?
The adjustments excluded the financial impact of decreases in Personal Consumption Expenditure (PCE) and cross-border travel due to the pandemic. Certain pandemic-related expense savings, such as those from reduced travel and entertainment (T&E), were also excluded from the calculation of payouts.
What is the implication of capping payouts at the target amount?
Capping the maximum payout for both the 2020 Annual Incentive Awards and 2018 PSU Awards at the target payout amount means that executives cannot earn more than the target incentive, even if they exceed adjusted performance metrics. This is expected to result in lower overall compensation for 2020 compared to the previous three years and aligns executive rewards more closely with the challenging operating environment.
How does this compensation adjustment relate to shareholder interests?
The HRCC stated that these adjustments are designed to align executive compensation with stockholder interests. By focusing on performance within management's control and capping payouts, the company aims to reward prudent management during unprecedented times and ensure the long-term creation of value for stockholders, while also maintaining the retention of critical leadership talent.
04—Continue