The Alignment Gap Between Creating V alue, Performance Measurement, and Long - Term Incentive Design

IRRC Institute

Description

Figure 33: Long-term incentive awards (fiscal year 2013)- source Incentive Lab ................................................. 53 Figure 34: Common performance metrics ............................................................................................................ 54 Figure 35: Performance metrics used in performance-based awards (fiscal year 2013)- Incentive Lab .............. 55 Figure 36: Metrics for performance-based awards 2013- by sector – Incentive Lab ...........................................

56 Figure 37: Realities in the use of return and value base performance metrics in LTI design ............................... 56 Figure 38: Longest performance period for LTI performance design – Incentive Lab .......................................... 57 Figure 39: Longest performance period for LTI performance design – by sector – Incentive Lab .......................

58 Figure 40: Performance metrics change for incentive design – Incentive Lab ..................................................... 59 Figure 41: Peer group change for incentive design and relative performance benchmarking- Incentive Lab ..... 60 Figure 43: Economic Profit and Market Enterprise Value growth ........................................................................

69 Figure 44: Economic Profit, Future Value and required Future Value return ....................................................... 70 Figure 45: ROIC, WACC, Economic Profit and Future Value benchmarks by sector (period: 2008-2012) ............ 71 Figure 46: Value quadrant summary – 128 sample companies (period: 2008-2012)...........................................

72 Figure 47: Value quadrant 1 – 32 companies with detailed performance metrics .............................................. 73 Figure 48: Value quadrant 2 – 32 companies with detailed performance metrics .............................................. 74 Figure 49: Value quadrant 3 – 32 companies with detailed performance metrics ..............................................

75 Figure 50: Value quadrant 4 – 32 companies with detailed performance metrics .............................................. 76 Figure 51: Shareholder return correlations with operating performance by sector for period 2003 – 2012 (rolling five-year performance periods over ten-years of observations) .............................................................. 77 The Alignment Gap between Creating Value, Performance Measurement, and Long-Term Incentive Design 82 .