Plan Now, Act Later: Smart Moves in a Wild Trade Environment
In today’s whirlwind of on-again, off-again tariffs, trade tension, and economic unpredictability, the best offense might just be a strong defense. Or as Clearbridge puts it: “Plan now, act later.”
With new trade policies creating uncertainty about the bottom line, this recent guidance emphasizes a proactive mindset grounded in data, scenario modeling, and thoughtful planning, especially when it comes to incentive programs and shareholder alignment.
Impact Analysis. Before rushing into plan changes, get a solid grasp of how tariffs, now or in the future, may affect operations (we know - easier said than done). Go beyond the immediate cost of goods to consider broader implications — from supplier pricing to customer behavior and capital planning.
A recent PwC report recommends a robust analysis on EPS and shareholder returns. The takeaway? Simulate multiple scenarios, plan for the worst, and mitigate risks wherever possible.
Incentive Plans in the Crosshairs. In a volatile market, shifting stock prices can wreak havoc on your compensation strategies, from performance targets to share pools. The Center is here to help with a set of guidelines offering six key levers for consideration:
Set LTI performance goals annually. Adds flexibility but requires clear disclosure.
Use relative metrics. Keeps performance competitive but needs a plan if TSR is still negative.
Leverage committee judgment. Allows discretion but opens the door to increased scrutiny.
Create overlapping award cycles. Provides room to adapt but can add complexity.
Revisit the equity mix. Boosts retention but may shift risk to the company.
Flatten the payout curve. Smooths volatility but may reduce motivational impact.
Note: these are not quick fixes — they’re strategic options to keep on the radar while Finance and HR closely monitor financial projections.
Pay Attention to Burn Rates. Clearbridge flags the impact of stock declines on your share pool.
Model different share usage scenarios to understand the life of your current pool.
Refine eligibility criteria, if needed, to preserve shares.
Adjust vehicle mix or revisit your share determination methodology to stay flexible and fair.
Bottom line: Control What You Can and Prepare for What You Can’t. While immediate changes may not be necessary (or wise), committees should focus on balancing plan outcomes with shareholder experience.
Megan Wolf
Director, Practice, HR Policy Association and Center On Executive Compensation
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