Goal Setting: Meeting Stakeholder Expectations in an Increasingly Dynamic and Complex World

Goal Setting: Meeting Stakeholder Expectations in an Increasingly Dynamic and Complex WorldZoom inDownload PDF

The perennial challenge of setting meaningful, yet realistic, incentive-plan goals has become ever more difficult in an increasingly complex and rapidly changing business world.

Companies now must also accommodate the growing importance of a range of stakeholders. Historically, incentive plan goals have largely focused on meeting the needs of shareholders and driving total shareholder return (TSR). Yet, contemporary thinking has companies taking a more holistic view, one that explicitly recognizes the concerns of employees, customers, suppliers, regulators, and the community at large. Although shareholder expectations likely remain primary, meeting the expectations of other stakeholders is fundamental to generating long-term, sustainable shareholder value creation.

The need to get it right by gauging performance in ways that reflect stakeholder concerns has been further heightened by the introduction of annual say on pay, in which goal-setting rigor is subject to regular and increasing scrutiny by institutional investors and proxy advisers such as Institutional Shareholder Services (ISS) and Glass-Lewis & Co. LLC.

With so much at stake, what is a company to do?

This article by Seymour Burchman and Mark Emanuel originally appeared in the WorldatWork Journal, Third Quarter 2015.