Tag: performance metrics

Does inclusion of executive compensation metrics related to corporate social responsibility lead to long-term value creation?

In this recent academic study, Social Responsibility Criteria in Executive Compensation: Effectiveness and Implications for Firm Outcomes, the authors examined the impact of the integration of elements of corporate social responsibility, such as environmental and social performance, into executive compensation performance criteria.  In the decision-making process, executives tend to gravitate toward the achievement of short-term goals and to respond more readily to more prominent direct stakeholders, such as customers and shareholders. But CSR metrics typically have a long-term pay-off and involve less direct stakeholders, such as the environment and the local community.  The question is: is the inclusion of CSR performance metrics in executive comp programs effective to motivate executives to achieve those longer-term CSR goals, engage with CSR stakeholders and enhance long-term value creation?

Do performance metrics based on rTSR transform an equity award into a lottery ticket?

According to a  2017 report from Equilar, an executive compensation data firm, “relative total shareholder return” continues to be the most common performance measure used in long-term incentive plans for CEOs among S&P 500 companies. (See this PubCo post.)  But this article in CFO.com contends that, with a metric of rTSR, the “pay for performance linkage” is “weak”; rather than rewarding long-term performance, use of rTSR is tantamount to giving “management a lottery ticket.”

Pay for performance — more style than substance?

Comp Committees appear to have gotten the message when it comes to executive pay for performance.  As discussed in this article in the WSJ, executive compensation “is increasingly linked to performance,” but investors are now asking whether the bar for performance targets is set too low to be effective. Are companies just paying lip service to the concept?

New revenue recognition standard— don’t ignore the impact on compensation

by Cydney Posner At the recent Bloomberg BNA Conference on Revenue Recognition,  a Deloitte partner observed that, to the extent that, in awarding compensation, companies use metrics that are keyed to revenue, the new revenue recognition standard could affect compensation or bonus plans because the ways of measuring and the […]

Is relative TSR still the performance metric of choice?

by Cydney Posner According to a just-released report from Equilar, an executive compensation and corporate governance data firm, “relative total shareholder return” continues to be the most common performance measure used in long-term incentive plans for CEOs among S&P 500 companies.  However, after years of increasing prevalence among companies in […]

Are the days of “I’ll-scratch-your-back” cronyism history?

by Cydney Posner As discussed in a PubCo post last week, a theory that is currently gaining purchase is that, whether as a result of say on pay or otherwise, the increased influence of proxy advisory firms has led to a kind of homogenization of executive pay packages based on […]

It’s back to square one: pay CEOs with short-term incentives?

by Cydney Posner How to structure executive pay to drive performance over the long term—while avoiding pay levels that would be considered excessive—is a conundrum for compensation committees, consultants, proxy advisory firms and others involved in setting or analyzing executive compensation. And the analysis has only become more complex since […]