A Better Way to Align Pay, Performance

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In recent years, a lot of discussion about aligning pay with performance for corporate executives has focused on the use of performance conditions for equity grants. The idea is that by tying the vesting of equity to explicit performance goals, executives will be held more accountable for results in order to “earn” the major share of their compensation.

However, in today’s environment, proxy advisors and many shareholders are often more concerned with the reported accounting value for equity incentives at grant rather than how much is actually earned by executives for performance. As a result, while performance share plans clearly have a role to play in executive compensation design, they are far from a panacea to address the pressure to improve pay for performance alignment.

Download the full article, “A Better Way to Align Pay, Performance.”

This article by Dan Marcus and John Borneman originally appeared in NACD Directorship in August 2013.