Within Range: How to Establish Your Short-Term Incentive Pay Goals

Aligning executive compensation with shareholders’ interests is one of the most important mandates compensation committee members are tasked with annually. Developing an appropriate pay package that carries a significant portion of “at-risk” compensation is critical to motivate and incentivize executives to achieve meaningful growth targets under short- and long-term incentive programs. One of the key challenges faced by compensation committees is determining what range of performance goals (i.e., threshold-target-maximum) should be established under incentive programs.