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Annual Bonus Plans for Public Company


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We have two issues with our annual bonus plan for management: 

First, the bonuses are going to be lower than they would have been due to the negative, unexpected impact of tax reform.   We want to calculate bonuses without taking into account his impact.

Second, we have individual and project objectives, because people have been focusing on project objectives, their individual objectives are going to be down. We want them focusing on project objectives, so we don't want them to be punished and would just like to pay out individual objectives at 100%. 

I'm worried about three things, and would like to know if you have any thoughts/concerns on my worries or any other thoughts and concerns. 

1) The plan doesn't give us the ability to adjust for tax reform (we have built in ability to adjust for other things, just not for this).

2) ISS doesn't like discretionary awards. 

3) We're worried backing out the negative impact of taxes will blow 162(m) for one employee. 

Thanks in advance!

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The effect of legislation, tax or otherwise, is a common discretionary adjustment to plans like this by Comp Committees. So I don't have angst about you doing that. In fact, much of 2007-2008 bonuses were paid using uber-Committee discretion because hardly anyone was making their goals back then, according to available survey data.

ISS does not like discretion yes, but many companies adjust their results somewhat or minimally if circumstances outside the control of management affect the results.

Not sure what you mean by the 162(m) reference.

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