PERFORMANCE MEASUREMENT IN EXECUTIVE INCENTIVE PROGRAMMES
In most of the organizations, executives are rewarded independent of company performance. Such practices, in fact, built the argument that executives get rich at the expense of shareholders. Because of such negative perception, linking executive compensation to organizational performance, shareholders’ value creation has become extremely important. Effective performance measures ensure that executive compensation is commensurate with performance. Regardless of the industry, there are certain criteria that incentive performance measures should ideally meet. They should be:
- Aligned with shareholders’ interests
- Definable
- Measurable
- Controllable
- Easily communicated and understood
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