October 27, 2026
Long-Term Incentives: 10-Year Analysis of Pay-for-Performance Alignment
This memo from Compensation Advisory Partners analyzed payouts from long-term performance plans over a 10-year period for 100 large U.S. public companies across 11 industries. The goal was to assess payout patterns across market cycles, understand the impact that relative total shareholder return (TSR) metrics have on payout patterns, and give management teams and compensation committees a “rule of thumb” for evaluating the degree of stretch in long-term performance goals. Here are the three key takeaways:
1. Based on our analysis of long-term incentive payouts over a 10-year period, the degree of difficulty, or “stretch” embedded in long-term performance goals translates to a 95% chance of achieving at least Threshold performance, a 70% chance of achieving at least Target performance, and a 20% chance of achieving Maximum performance, suggesting performance goals balance achievability at Threshold and Target with significant “stretch” at Maximum.
2. Funding on relative TSR metrics tends to be more evenly distributed while funding on financial metrics tends to skew toward target and above. This reflects the different roles the metrics play with financial metrics having clearer line-of-sight for plan participants and relative TSR being more of an outcome metric tied to the shareholder experience.
3. Long-term performance plans have generally been effective at aligning pay and performance as the top performers in each cycle consistently paid above target at a higher rate than the broader sample.
We’ve posted this analysis along with other resources for compensation committees and advisors in our “LTIPs” Practice Area.
– Liz Dunshee
Blog Preferences: Subscribe, unsubscribe, or change the frequency of email notifications for this blog.
UPDATE EMAIL PREFERENCESTry Out The Full Member Experience: Not a member of CompensationStandards.com? Start a free trial to explore the benefits of membership.
START MY FREE TRIAL