Equity Compensation Strategies for Underwater Performance

This guide addresses the challenges faced by companies when performance goals set for equity compensation become unattainable. It outlines the implications of such situations, including potential impacts on talent retention and the alignment of pay-for-performance. The document presents a structured approach for compensation committees to evaluate the seriousness of the issue and consider corrective actions. It details four steps: assessing the cause of unattainable goals, gauging the severity of the problem, and considering both immediate and deferred actions to restore incentives. Strategies discussed include modifying performance targets, extending performance periods, and redesigning awards to better align with current market conditions. The guide emphasizes the importance of stakeholder communication and the need for data to support any modifications made to equity awards. By following these strategies, companies can navigate the complexities of underwater performance equity and maintain effective incentive structures.