Six Approaches to Incentive Targets Amid Economic Volatility and Uncertainty

The process of setting performance objectives for long-term incentive awards is particularly challenging in the context of an uncertain and volatile global environment.

Here to help is Charlie Tharp’s Six Approaches to Incentive Targets Amid Economic Volatility and Uncertainty. This piece presents a collection of alternative approaches (with corresponding pros and cons) that companies may find helpful in structuring long-term incentive arrangements in an ambiguous climate.

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A key responsibility of compensation committees is the approval of incentive plan design, especially determining individual awards for the senior-most executives and setting performance objectives for annual and long-term incentive payouts.

In times of uncertainty, compensation committees may seek alternative design approaches to mitigate the risk of setting overly aggressive or overly conservative long-term performance targets.