Consider This Incentive Pay Approach

By Randi Morrison posted 04-28-2020 09:49 PM

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"The Role of Non-Financial Metrics in Annual Incentive Programs" from Pay Governance offers refreshing creative thinking about how to address incentive pay metrics in an environment that does not currently lend itself to establishing solid financial goals. With the confines of the recently eliminated IRC Section 162(m) performance-based exception no longer relevant, the article encourages consideration of non-financial performance metrics that are critical to the company's pandemic recovery and consistent with long-term sustainability.

Suggested non-financial objectives include supply chain risk mitigation, effecting strategic opportunities, workforce issues, maintaining adequate liquidity and debt covenant compliance, and much more. Whether and to what extent companies are able to reward non-financial performance along these lines notwithstanding likely subpar financial results is a fact and circumstances-specific determination. The firm also suggests retooling ESG-related metrics that - in the current environment - may not be feasible or practical (e.g., gender-based hiring quotas) in a way that promotes still-relevant and attainable underlying principles (e.g., promotion and development of diverse talent).

This post first appeared in the weekly Society Alert!

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