Carl Hess
WILLIS TOWERS WATSONAbout Carl Hess
Carl Hess (age 63) is CEO of Willis Towers Watson (WTW) and a board director since 2022. He is a Fellow of the Society of Actuaries, a member of the Conference of Consulting Actuaries, and a Chartered Enterprise Risk Analyst, with a B.A. cum laude in logic and language from Yale University . In 2024, WTW reported Adjusted Operating Margin of 23.9% and Adjusted Net Revenue of $9,923.7M; the 2022 PSU cycle paid out at 149.4% on results, while compensation actually paid to the CEO was $22.0M vs. SCT total $12.5M; TSR value of an initial $100 (12/31/2019 basis) reached $166 vs peer group $169, and GAAP net income was a loss of $98M .
Past Roles
| Organization | Role | Years | Strategic impact |
|---|---|---|---|
| WTW | Chief Executive Officer | Jan 2022–present | Led completion of Transformation Program; focus on profitable growth and FCF discipline |
| WTW | President | Aug 16, 2021–Dec 31, 2021 | Transition to CEO with continuity across segments |
| WTW | Head of Investment, Risk & Reinsurance | Oct 27, 2016–Aug 16, 2021 | Oversaw investments/broking/actuarial consulting capabilities |
| WTW | Co‑Head of North America | Jan 4, 2016–Oct 27, 2016 | Post‑merger leadership across North America |
| Towers Watson | Managing Director, The Americas | Feb 1, 2014–Jan 4, 2016 | Regional growth execution |
| Towers Watson | Managing Director, Investment business | Jan 1, 2010–Feb 1, 2014 | Expanded investment advisory platform |
| Watson Wyatt | Global Practice Director, Investment business | Prior 20+ years to 2010 | Built core investment consulting franchise |
External Roles
| Organization | Role | Years | Notes |
|---|---|---|---|
| Society of Actuaries | Fellow | N/A | Professional credential |
| Conference of Consulting Actuaries | Member | N/A | Professional affiliation |
| — | Other public company boards | N/A | None disclosed in proxy |
Fixed Compensation
| Component | 2024 |
|---|---|
| Base salary ($) | $1,000,000 |
| STI target (% of salary) | 200% |
| STI target ($) | $2,000,000 |
| Actual STI paid ($) | $2,370,400 (118.5% of target) |
Performance Compensation
2024 Short‑Term Incentive (STI) Design and Outcome
| Item | Metric/Detail | Weighting | Target | Actual/Result | Payout impact |
|---|---|---|---|---|---|
| Enterprise metrics | Adjusted Net Revenue / Adjusted Operating Margin / FCF Margin (scale set by HCC) | Remainder after individual (CEO individual = 20%) | Net Rev $9,996.0M; AOM 23.2%; FCF 14.0% | Enterprise overall result 119.4% | Drives majority of STI |
| Individual performance | CEO objectives (strategy, FCF discipline, talent, transformation) | 20% | 100% baseline | 115.0% approved | +3 ppt to total |
| Total STI payout | Calculated outcome | — | Target $2,000,000 | $2,370,400 | 118.5% of target |
Long‑Term Incentive (LTIP) – 2022 PSU cycle (Performance period ended 12/31/2024; vests April 2025)
| Metric (weight) | Target | Actual 2024 | Performance vs target | Payout factor |
|---|---|---|---|---|
| Adjusted Operating Margin (50%) | 23.0% | 23.9% | 103.9% | 145.0% |
| Adjusted Net Revenue (30%) | $9,530.1M | $9,923.7M | 104.1% | 200.0% |
| Adjusted EPS (20%) | $17.55 | $16.92 | 96.4% | 84.3% |
| Overall PSU result | — | — | — | 149.4% |
| Shares (Hess) | Target PSUs incl. dividend equivalents | Earned PSUs | Vest timing | — |
| 2022 PSUs | 23,795 | 35,550 | Expected April 2025 | — |
2024 LTIP Grants (awarded April 1, 2024)
| Award type | Units (Hess) | Grant date fair value ($) | Vesting / Performance |
|---|---|---|---|
| PSUs (target/max) | 23,314 / 46,628 | $6,808,387 | 3‑yr performance to 12/31/2026; certify post‑period |
| RSUs | 7,771 | $2,124,902 | Time‑based per LTIP agreements (company has used equal installment schedules) |
Equity Ownership & Alignment
| Measure | Detail |
|---|---|
| Total beneficial ownership | 103,514 shares; includes 42,224 time‑based RSUs vesting 4/1/2025 |
| Ownership as % of outstanding | Less than 1% (proxy table) |
| Anti‑hedging/pledging | Directors and executive officers prohibited from hedging and pledging company shares |
| Executive ownership guidelines | CEO: 6x base salary; 100% retention of net shares until guideline met; all NEOs met minimum as of 12/31/2024 |
| Options outstanding/exercised | No option grants since 2015; no exercises in 2024 |
| 2024 vesting activity | Shares acquired on vesting: 10,065; value realized $2,731,152 |
| Unvested RSUs (market value) | 2,446 ($766,185); 5,929 ($1,857,200); 7,842 ($2,456,428) at $313.24 as of 12/31/2024 |
| Unearned PSUs (market/payout value) | 23,795 ($7,453,546); 28,086 ($8,797,659); 23,529 ($7,370,224) at $313.24 as of 12/31/2024 |
Employment Terms
| Topic | Provision |
|---|---|
| Employment agreement | Mr. Hess is not party to an employment agreement |
| Severance plan | Covered by Executive Severance Plans (U.S./Non‑U.S.) |
| Involuntary termination (outside CIC) | Cash severance equal to 2x base salary + 2x target STI; installments over 24 months (CEO) |
| Qualifying termination (during CIC) | Lump sum cash equal to 3x base salary + 3x target STI; pro‑rata STI for year of termination; double‑trigger equity treatment via award terms |
| Excise tax gross‑ups | None; cut‑back mechanism to avoid 280G excise tax if beneficial after tax |
| Equity acceleration mechanics | Double‑trigger vesting under LTIP award agreements; detailed treatment by scenario (retirement, death/disability, CIC) |
| Clawback (recoupment) | Applies to cash and equity; covers financial restatement and “Detrimental Conduct”; 3‑year lookback; extends beyond SEC/NASDAQ minimums |
| Restrictive covenants | Award agreements impose non‑competition/non‑solicitation up to 24 months post‑termination, and confidentiality indefinitely |
Estimated Payments as of 12/31/2024
| Scenario | Cash severance ($) | Perqs/benefits ($) | Equity acceleration ($) | Total ($) |
|---|---|---|---|---|
| Termination outside CIC | 6,000,000 | 45,618 | 22,556,726 | 28,602,344 |
| Termination during CIC | 11,370,400 | 45,618 | 28,701,242 | 40,117,260 |
| Retirement | — | — | 22,556,726 | 22,556,726 |
| Death or disability | — | — | 32,383,378 | 32,383,378 |
Board Governance
- Director since 2022; not independent (only non‑independent director is CEO), while all other directors and all committee members are independent under SEC/NASDAQ and WTW standards .
- Separate CEO and independent Board Chair; regular executive sessions of independent directors chaired by the Non‑Executive Chair; Board met 8 times in 2024 and all directors met at least 75% attendance and attended the AGM .
- Committees (Audit; Human Capital & Compensation; Governance & Nominating; Risk & Operational Oversight) are comprised solely of independent directors; CEO is not listed as a member of any committee .
Director Compensation and Say‑on‑Pay Context
- Non‑employee directors receive $125,000 cash retainer and RSUs valued at $220,000; committee chair fees range $20,000–$30,000; Non‑Executive Chair receives additional fees; directors are subject to 5x cash retainer ownership guideline .
- 2024 Say‑on‑Pay approval was approximately 90%, with ongoing shareholder engagement (60% reached; ~40% responding) .
Compensation Structure Analysis
- Variable pay weight: 91% of CEO’s 2024 target total direct compensation is variable (STI + LTIP) under pay‑for‑performance principles .
- STI metrics emphasize profitable growth and cash generation (Adjusted Net Revenue, Adjusted Operating Margin, FCF Margin) with enterprise result at 119.4% and CEO individual at 115% producing 118.5% payout of target .
- LTIP mix: PSUs 75% and RSUs 25% of annual LTIP; 2022 PSU cycle paid 149.4% based on margin/revenue/EPS formula; 2024 PSU fair value $6.81M at target with maximum $12.25M; RSU fair value $2.12M .
- No options since 2015; no repricing; robust recoupment policy and no CIC tax gross‑ups support governance quality .
Multi‑Year Compensation (Summary Compensation Table)
| Metric | 2022 | 2023 | 2024 |
|---|---|---|---|
| Salary ($) | 1,058,173 | 1,000,000 | 1,000,000 |
| Share awards ($) | 7,249,654 | 8,499,764 | 8,933,289 |
| Non‑equity incentive comp ($) | 1,801,052 | 2,499,508 | 2,370,400 |
| Change in pension value ($) | — | 156,923 | — |
| All other compensation ($) | 620,021 | 512,637 | 198,401 |
| Total ($) | 10,728,900 | 12,668,832 | 12,502,090 |
Risk Indicators & Red Flags
- Pledging/hedging prohibited; no evergreen share reserve, no option repricing, no CIC excise tax gross‑ups; CEO has no employment agreement .
- Related‑party transaction policy in place with Audit Committee oversight; no Hess‑specific related transactions disclosed .
- Compensation risk assessment (Semler Brossy) found programs do not encourage excessive risk taking .
Compensation Peer Group
- 2024 peer group (16 companies) includes Aon, Marsh & McLennan, ADP, Fiserv, S&P Global, etc.; WTW at 31st percentile revenue and 50th percentile market cap vs peers; Semler Brossy is the independent HCC consultant .
Investment Implications
- Alignment: Strong ownership policy with 100% net share retention until 6x salary guideline satisfied, anti‑pledging/hedging, and majority performance‑based equity support long‑term alignment .
- Near‑term supply risk: 2022 PSU vesting expected April 2025 for ~35,550 shares to Hess could add selling pressure in windows, although retention guidelines may limit net selling .
- Protection and flexibility: No CEO employment agreement but robust double‑trigger CIC and severance (3x base+bonus) reduce retention risk; no gross‑ups and recoupment policy mitigate governance concerns .
- Performance linkage: 2024 STI and PSU metrics tied to revenue growth, margin expansion, EPS/TSR; 149.4% PSU payout evidences strong execution on margin and revenue, offset by GAAP net loss, requiring focus on cash and quality of earnings .