Agenda – Investors May Accept Discretionary Bonuses ‘Within Bounds’

March 30, 2020

Though the stock market’s tumble amid the ongoing coronavirus pandemic is expected to hit executives’ pay, compensation experts are urging boards to avoid making drastic changes to incentive plans or targets. However, investors may be willing to accept that execs receive some amount of bonus compensation on the other side, sources say.

Robin Ferracone, founder of Farient Advisors and a comp committee member at Trupanion, says that long-term plans are designed with just that in mind: the long term. Therefore, in her view, “making artificial adjustments is not in the spirit” of what a long-term incentive plan represents. Many of Farient’s clients ended their fiscal year last fall, so they are not having to make immediate decisions. When the time comes in 2020, if the economy doesn’t bounce back fully, Ferracone says she thinks that investors could be “tolerant” of companies’ paying out annual bonuses, but she advises committees to stick with paying only 20% to 30% of target. Anything more won’t be viewed in a positive light, she says.

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