Compensation Committees devote considerable effort to fine-tuning their CD&As and other required disclosures - but often overlook the importance of also communicating performance-based executive pay programs internally. As a result, executives may misinterpret exactly what performance is expected of them under the plan and how payouts will be calibrated, particularly if the company’s compensation philosophy has changed and incentives have replaced more traditional plan features.
This article discusses key issues around the effective communication of performance-based programs to executive participants, including clarifying line-of-sight and the extent to which corporate and other business unit performance results will be factored into payouts.
