In this issue, answers to:
What are some of the shortcomings of using earnings per share (EPS) as an incentive plan performance measure?
How can companies incorporate the shareholder experience into their incentive programs without abandoning financial and strategic objectives?
What is the right balance between accuracy of performance and the complexity of the measures?
How might a multiperspective approach to target setting help companies more accurately assess performance?
What are the seven virtues of performance measurement?
One of the greatest challenges faced by both boards and management teams is effectively measuring and rewarding executive performance. Developments over the past decade have further heightened the focus on performance measurement issues, including an increase in the use of performance-based long-term incentive plans and new disclosure rules requiring a more detailed explanation of how compensation decisions are linked to performance results.
Despite the increased usage and attention, many companies continue to struggle with defining and managing their performance measurement system. Much conventional wisdom has developed based on individual experiences, but what works for one company might fail for another. The performance measurement system must reflect each organization’s unique industry dynamics, business strategy and management style.
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