Linking executive pay with performance

Choosing performance targets a challenge for exec team
By Gordon Frost and Jane Craighead
|Canadian HR Reporter|Last Updated: 11/01/2007

As investor activism grows, the focus on corporate governance is becoming more acute. One major concern of institutional investors has been the link between executive pay and company performance.

As HR professionals, directors and compensation consultants become more familiar with the latest trends in pay and performance, many have also experienced the bumps.

Many companies have moved to long-term incentive plans that incorporate the use of real or phantom shares, also known as share units. Many of these equity-based plans vest at the end of three years based on a specific performance measure. However, a major issue associated with these plans is setting an appropriate performance objective three years in advance of the vesting date.