The Advisors' Blog

– Broc Romanek

Here’s a study by FW Cook about annual incentives. The findings include:

– 83% of companies in the Top 250 use at least one specific financial measure to determine annual
incentive payouts, of which 75% use two or more financial measures.
– Non-financial measures (e.g. strategic and individual performance) are also common and are used as a stand-alone
measure by 52% of companies with non-discretionary plans.
– Profitability measures are not only the most prevalent annual incentive measures (utilized by 92% of companies with
non-discretionary plans), but profitability measures also carry the heaviest weighting among the companies that use
them (on average, comprise 59% of the weighting of annual incentive plans among those that use them).
– Among companies with heads of business units reported in their proxy statements, the dominant practice is to
emphasize corporate over business unit results for these officers.
– 62% of companies in the Top 250 provide a maximum annual incentive payout opportunity of 200% of
target, with the remainder divided approximately equally above and below 200%