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TWELVE WAYS TO STRENGTHEN YOUR INCENTIVE PLAN
Author(s) -
Glassman David
Publication year - 1999
Publication title -
journal of applied corporate finance
Language(s) - English
Resource type - Journals
eISSN - 1745-6622
pISSN - 1078-1196
DOI - 10.1111/j.1745-6622.1999.tb00012.x
Subject(s) - incentive , compensation (psychology) , plan (archaeology) , variety (cybernetics) , shareholder , teamwork , value (mathematics) , business , incentive program , shareholder value , subject (documents) , public relations , marketing , finance , actuarial science , economics , microeconomics , management , computer science , political science , psychology , social psychology , corporate governance , archaeology , artificial intelligence , machine learning , library science , history
This paper argues that most incentive compensation plans are ineffective for a variety of reasons, including: too many performance measures and too much complexity;▪ arbitrary targets that are subject to intense lobbying by executives; ▪ caps and floors that narrow the payout range and stifle incentives; ▪ performance measured at a level too high to be meaningful for most managers, or too low to encourage teamwork; and ▪ a failure to integrate the incentive plan into the overall compensation philosophy. ▪ After examining these problems, the author offers 12 suggestions for implementing plans that support management's aspirations to create value for shareholders.