Our Insights

Annual & Long-Term Incentive Program Design

Read about recent trends in annual and long-term incentive program design, including budgeting, selection of performance metrics, target setting, the role of discretion, vehicle mix, and the role of equity in talent retention.

Adjusting Comp Goals “After the Fact”

Goal setting for executive incentive plans is generally a difficult proposition. In many situations, it would be desirable to have the flexibility to adjust plan targets automatically on an “after-the-fact” basis if the actual operating environment deviated significantly from the company’s original budgeting and planning assumptions. This article lays out an approach for automatically adjusting plan targets in a prescribed manner and illustrates the approach with a case study based on one of our clients. Read more

The Fallacy of Grant Date Fair Value

The great challenge in benchmarking a company’s executive compensation plan against the plans of peer companies arises from a simple fact: not all long-term incentive programs are created equal. Because companies use differing types and mixes of incentives, with the value of each calculated differently, comparison among programs can be a matter of some complexity. Chip Thomas and Anne McGettigan cut through compensation plan complexity with Grant Date Fair Value (GDFV) in this blog post. Read more

Setting Incentives Without a Budget

This is the season when many boards evaluate operating budgets and set targets for incentive compensation plans for executives. The two processes are so commonly blended together, they have essentially become one. And that can be a problem. This article by John Borneman originally appeared in NACD Directorship. Read more

Advancing the Dialogue: Market-Based Framework for Adjustments

Today’s highly uncertain market presents a myriad of challenges when it comes to goal-setting for incentive plans. Over the course of a performance cycle, companies may find that the volatile operating environment may present a variety of unforeseen “headwinds” or “tailwinds” that make the established goals either too challenging or too easy. In this article we explore a market-based framework to automatically adjust plan targets on an “after-the-fact” basis if it is determined that the actual operating environment deviated significantly from the company’s original budgeting and planning assumptions. Conventional wisdom suggests that executives should always hold on to company stock earned through incentive plans. However, recent research conducted by Semler Brossy indicates that stock sales are relatively common practice for long-serving executives, and in this article we offer a principled approach which encourages appropriate diversification over time. Read the entire article (PDF) written by Seymour Burchman and Mark Emanuel. Read more

Solving Incentive Formula Conflicts

How should boards handle situations where the incentive formulas indicate one payout, but directors believe another is more appropriate? Read this article by Barry Sullivan which originally appeared in NACD Directorship. Read more

Advancing the Dialogue: Breaking The Link Between Budgets And Pay

Companies typically use the annual budgeting process to set performance goals for annual and long-term incentives. This article suggests eliminating budgets as the starting point for the goal-setting process and offers four alternative approaches for consideration. Read the entire article (PDF) written by Seymour Burchman. Read more