Center On Executive Compensation
Analysis

Setting Incentive Targets in a Time of Economic...

Published on: April 29, 2022

Authors: Ani Huang

Topics: Executive Pay Plan Design

The process of setting performance objectives for long-term incentive awards is complicated by the uncertain and volatile context within which compensation committees exercise their judgement as to the appropriate metrics and corresponding targets for performance-based incentives. The factors that make it challenging to determine multiple-year objectives include the impact of legislative and regulatory actions, such as trade restrictions and tax law changes, uncertain global economic trends, the ongoing impact of the COVID pandemic, and other potential disruptions in the global economy. While some of the sources of uncertainty impact companies across industries, there are also factors that may be specific to a given sector that produce additional uncertainty and volatility. These uncertainties have led many compensation committees to question their ability to set reasonable multi-year performance objectives. 

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Ani Huang

President and CEO, Center On Executive Compensation

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