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Evaluating Performance Goals and Incentive Compensation in Light of COVID-19

Boards and compensation committees will be reevaluating their incentive compensation arrangements in light of the COVID-19 pandemic and the resulting market uncertainty. Both long-term and short-term incentive plans can lose motivational and retention value if the performance goals are unachievable or if they do not align with market reality. Companies that have not yet established performance goals for their 2020 equity and bonus awards should carefully consider market conditions and shareholder perception before establishing goals, focusing on motivating their executives with pay for performance that aligns with shareholders’ interests, while giving the company flexibility to navigate through uncharted territory. To the extent possible, companies should also consider delaying the issuance of incentive compensation awards until there is more stability in the business and in the financial markets. Companies that have already established goals for their 2020 awards (or that are evaluating the continued effectiveness of performance goals for prior year… Continue Reading

April 2020
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