They Just Thought of This Now?

A recent Hewitt Associates study  shows that more companies are raising the value of their long-term incentives to executives but—lo and behold—an increasing number of companies are also tying long-term incentives to specific performance goals that must be met before the grants are made.

It’s about time.  In the past, these incentives were not typically tied to specific performance goals.  Instead, the executive did well if the price of the stock did well.  This in some cases resulted in an over emphasis on actions that boosted the stock price in the short-term, without proper attention to the potential long-term impact of those actions.

A move to developing specific long-term goals that the executive must meet before he or she receives the incentive is, in my view, a step in the right direction.   More accountability in pay, whether in the executive suite or elsewhere, is long overdue.

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