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Does Use of Non-GAAP Performance Metrics Mean Executives are Gaming the System?
Towers Watson Link to more items from this source
Apr. 22, 2014

"[W]hile the Audit Analytics study found an increase in the prevalence of non-GAAP metrics in incentive plans over the past few years, this likely reflects the fact that companies are adopting plans that incorporate the key metrics being presented to investors in corporate financial statements.... A key to proper target setting is consistent application of the metric between when the target is set and when performance is evaluated. If certain aspects of the financial statement are being excluded from a non-GAAP incentive metric ... it shouldn't result in higher incentive awards as long as they are excluded consistently from both the initial budgeted level of performance and actual performance."

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