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Incentive Plan Analysis


Building effective incentive plans for executives is difficult and time consuming. In an environment of increased scrutiny from institutional investors, regulatory agencies, proxy advisors, shareholders, and others, it is even more important to have access to the highest quality data.

Beyond the proxy statement’s Plan-Based Award Table incentive plan data that is available in Equilar Insight, the Equilar Research Team has compiled a comprehensive and standardized data set covering executive performance-based Annual Incentive Plans and Long Term Incentive Plans, integrating proxy and plan document disclosure to capture all publicly available information.

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Annual Incentive Plan Analyses include:

Plan Features

  • Umbrella Plan
    A bonus plan that contains shareholder approved metric(s) that provide 162(m) deductible pool funding up to a maximum level. The pool may be allocated below the maximum through a combination of board discretion and/or a formal “plan within a plan”.

  • Circuit Breaker
    A bonus plan that contains a metric which if not achieved, shuts off funding for the bonus plan regardless of the achievement of other metrics.

  • Modifiers
    A bonus plan that contains metric(s) which are not weighted but can still increase or decrease payouts.

  • Discretionary Plan Flag
    A bonus plan where payouts are determined substantially on a non-formulaic basis.

Overall Weightings

  • Financial
    Metrics based on line items contained in the balance sheet, income statement, and statement of cash flows.

  • Market-Based
    Metrics based on stock price performance.

  • Non-Financial
    Metrics based on line items not in the balance sheet, income statement, or statement of cash flows, as well as most industry specific metrics.

  • Individual
    The board’s determination of personal performance based on discretionary considerations and/or strategic goal achievement.

Individual Performance (if applicable)

  • Weighting
    Formal weighting when applied to individual performance is captured.

  • Board Authority
    A bonus plan where individual performance is a consideration but has no formal weighting or multiplier effect. The board’s authority to increase and/or decrease payouts based on individual performance is flagged.

  • Multiplier Effect
    A bonus plan where an individual performance score is multiplied by a corporate performance score. The threshold to maximum multiplier range is captured.

Payout

  • Individual Score
    The payout vs. target if individual performance is weighted, or the multiplier applied if individual performance is a multiplier.

  • Corporate Score
    The payout vs. target based on corporate performance (excludes individual performance and modifiers).

  • Overall Score
    The total payout vs. target.

  • Board Discretion Used in Payout
    If the board exercised discretion to pay an amount other than the formula based amount, it’s flagged whether upward or downward discretion was applied.

  • Actual Target and Payout
    The disclosed target and payout.

Metric Details

  • Disclosed name
    The metric name as disclosed by the company.

  • Standardized name
    The metric name standardized by Equilar.

  • Definition and line-item adjustment disclosure
    Disclosure explaining how the metric is defined, as well as any disclosure regarding line-item adjustments made during the year.

  • Internal or External goal
    Shows if the metric is based solely on the company’s performance or based on performance vs. a comparator group.

  • External Benchmark, if applicable
    For external goals, shows which comparator group is being used.

  • Metric Payout type
    Shows the manner in which the metric is measured for determining payouts.

  • Growth Metric flag
    Flagged for metric goals disclosed as a growth percentage.

  • Metric Level (corporate, subsidiary, etc.)
    Shows what level of the corporation is being measured by the metric.

  • Metric Category
    Determines which metric bucket each individual metric weighting will flow into (Financial, Market-Based or Non-Financial).

  • Weighting
    The percentage of the bonus determined by performance of the metric.

  • Payout Leverage
    The threshold to maximum percentage payout vs. target that can be earned for that metric.

  • Performance Leverage
    The threshold to maximum percentage performance vs. target that corresponds to a threshold to maximum payout for that metric.

  • Threshold, Target and Maximum goals
    The actual threshold, target and maximum goals, if disclosed.

  • Actual Performance
    Performance for that metric for the year.

  • Performance vs. Target
    Performance as a percentage of target for that metric.

  • Payout vs. Target
    Payout as a percentage of target for that metric.

Forward looking disclosure

Plan changes that take effect the next fiscal year.


Long-Term Incentive Plan analyses include:

Plan Features

  • Circuit Breaker

  • Modifiers

Overall Weightings

  • Financial

  • Market-Based

  • Non-Financial (metrics listed)

Metric Details

  • Disclosed name

  • Standardized name

  • Definition and line-item adjustment disclosure

  • Performance Period – The full performance period for the metric.

  • Sub-Period measurements – Shows if any periods shorter than the full performance period are measured for purposes of determining part of the payout.

  • Internal or External goal

  • External Benchmark, if applicable

  • Metric Payout type

  • Growth Metric flag

  • Metric Level (corporate, subsidiary, etc.)

  • Weighting

  • Payout Leverage

  • Performance Leverage

  • Threshold, Target and Maximum goals

Forward looking disclosure

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