Financial Incentives － Perspectives and Implementation Guidance.pdf

: .
F compensation, level of deferred compensation, etc.
3. Conduct competitive
benchmarking • Benchmarking competitive compensation levels and structures, upper/lower quartiles for each level, etc.
• For each category of senior management, establish competitive compensation levels
4. Design high-level
compensation framework • Defining overall compensation framework in terms of three factors:
– Composition and variability, ., salary vs. incentives
– Timing, ., current vs. deferred, vesting period
– Instruments, ., cash, company stock/options, XYZ phantom stock
5. Develop compensation
program by category of • Linking value drivers and the compensation program
senior management – Develop robust performance metrics tailored to each category of senior management
– Design incentives to optimize performance metrics, using compensation framework
6. Stress-test the
compensation program • Testing robustness of compensation system by modeling the pay-out under a variety of scenarios, ., difference
performance levels and market conditions, and modeling aggregate impact of pay-out on XYZ overall financial
results
• Identifying potential adverse incentives and loopholes created by the system
7. Determine legal and tax
implications • Clarifying legal and tax implications of new compensation plans and identifying potential issues overall
• Defining unambiguous termination conditions, administration responsibilities, limits on awards, redemption