Setting Performance Goals for Long-Term Incentive Plans

For many companies, long-term incentives comprise the vast majority of an executive’s compensation. As such, defining metrics and setting performance goals are high-stakes activities.

This episode features Andrew McElheran, Partner and Lead Consultant at Meridian Compensation Partners, and Michael Meyer, Lead Consultant for Meridian. They discuss:

• Why the three-year performance period is the industry standard, despite being too short for many companies and too long for others.
• How the pandemic, ongoing market challenges like supply chain disruptions, and inflation continue to impact long-term performance goal setting.
• Best practices for the goal-setting process, including incorporating a variety of reference points: internal budget data, historical performance, peer group metrics and investor and proxy advisor expectations, to name but a few.
• The differences between financial and relative performance metrics and how companies evaluate relative performance.
• What investors really want to see reflected across a company’s relative performance goals: evidence that executives are in it for the long haul.