No Surprises. Understanding the Long-term Implications of Pay for Performance Awards

Challenge: As part of a heavily scrutinized industry, this Fortune 50 client wanted to recognize the contributions of its CEO and Named Executives Officers.  At the same time, the company wanted to test the pay for performance implications of the contemplated special award to ensure that there would be no backlash from proxy advisors and shareholders.

Approach: Using our Farient Forecaster™, we projected how programs would appear relative to appropriate pay outcomes at various levels of Total Shareholder Return (TSR) using different valuation assumptions. The pay program was then designed around future alignment to performance and to be consistent with the company’s compensation philosophy.

Result: Shareholders and proxy advisors responded positively to the award and considered its forward-looking pay for performance alignment test to be a hallmark of good governance.

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