4. Incentive Compensation

Aims and objectives of this chapter

• Explain the accounting issues involved in incentive compensation programs

• State the different types of cash incentive compensation plans currently in use

• Explore the prevalence of incentive compensation plans

• Discuss the various key incentive compensation metrics

• Explain the need to use sustaining financial value creation metrics

• Discuss the free cash flow measure as an incentive compensation metric

• Discuss the economic value added measure as an incentive compensation metric

• Discuss the residual income measure as an incentive compensation metric

• Discuss the use of a balance scorecard system as an incentive compensation triggering mechanism

An Introduction to Incentive ...

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