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How Incentive Plan Payout Patterns Differ in a Pre- and Post-COVID-19 World

“Annual incentive plans are an important tool that companies use to tie compensation outcomes to company performance. Setting the right goals with the right degree of difficulty or “stretch” is the key to ensuring that payouts are appropriate relative to performance. In early 2020, most companies set goals for their annual incentive plans in the context of a relatively stable macroeconomic backdrop. The COVID-19 pandemic and its impact on the global economy made these goals unattainable for many businesses shortly after they were set. As organizations consider how to grapple with the impact, it can be helpful to consider how these plans have rewarded employees during more stable economic cycles relative to performance.”

Read the full NACD BoardTalk article here.

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