The Myth and Reality of TSR as an Incentive Metric

There is a growing use of total shareholder return (TSR) as an incentive metric in long-term incentive compensation plans. While its merit as an indicator of long-term value creation is clear, Pearl Meyer sought to understand if its use as an incentive metric actually results in improved firm performance.

Empirical research was conducted in collaboration with the Cornell University ILR School’s Institute of Compensation Studies (ICS). Pearl Meyer and ICS analyzed ten years’ of data from S&P 500 index companies and the results and future recommendations are presented here.