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Incentive Compensation Plan Changes: How Companies Are Handling the Impact of COVID-19 on Performance Targets and Metrics

August 11, 2020

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Would you be interested to see how organizations are adapting their incentive compensation performance metrics in the face of a global pandemic? The attorneys at Winston & Strawn have compiled an extensive chart showing changes organizations are making, including the rationale behind their decisions.

In some cases, the incentive compensation plan changes involve short-term incentives; in some cases, the changes are being made to long-term incentives and in many situations, it’s both.

We’re sharing Mike Melbinger’s Executive Compensation Law blog post where he discusses the chart, which also happens to be dynamic. Winston & Strawn continually revises the online document as additional organizations make changes or as organizations already included in the chart make further adjustments.

From the Executive Compensation Blog:

Companies Changing Incentive Compensation Plan Performance Targets or Metrics Due to COVID-19

Since executives, compensation committee members, and executive compensation professionals began to recognize the havoc wreaked by COVID-19 on the performance targets and metrics they established before the breakout of the pandemic (which now seem to be meaningless and wholly unattainable), one of the most common topics of discussion has been what to do. However, it is not accurate to say that, like the weather, everybody talks about it, but nobody does anything about it. In fact, nearly all companies have discussed the matter and many have taken formal action to adjust their performance targets or metrics in order to give executives a realistic (and motivating) possibility of actually receiving a payout.

To help clients evaluate potential changes they are considering, by comparing them to what other companies have done, we prepared (and maintain) a chart showing the SEC disclosures made by most* of the companies that have made changes to their short- and long-term incentive plan performance targets or metrics since March/COVID. The chart includes a column showing the rationale disclosed by the company, if any, for the changes. Most of the disclosures so far are from Form 8-Ks. However, several companies (generally fiscal companies filing after the pandemic had begun) have disclosed changes in their proxy statements. Many more are sure to come. Many other companies no doubt have made similar changes, but not filed a Form 8-K, for a variety of reasons (which I may discuss in another post).

We will be updating this chart periodically, as similar filings are made in the future. So stay tuned.

*We certainly have missed some. If you are aware of any that are not on this list, please let me know and we will add them.

Click to view the chart: Disclosures of Incentive Compensation / Performance Metric Changes Due to COVID-19

#incentivecomp #executivecomp #COVID19

This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. Any tax advice contained herein is of a general nature. You should seek specific advice from your tax professional before pursuing any idea contemplated herein.

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