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Long-term incentive plans are excellence avenues to align key employees’ interests with the company’s overall long-term strategic goals and objectives. This requires carefully crafted performance metrics that will motivate and incentivize management to take certain actions for the betterment of stakeholders.
Overall Strategy
A&M assists companies with selecting metrics and calibrating the performance targets so that they are robust and challenging, yet achievable. Important questions to consider when implementing performance metrics within a compensation plan include:
- What goals does the company look to achieve?
- How is success defined with regards to these specific goals?
- What reporting or data collection mechanisms currently exist?
Latest Trends: ESG Metrics
While the alignment of executive compensation metrics with organizational financial metrics is widely used and accepted, organizations across all industries in both the public and private sectors are now adopting ESG-based incentives structured around several nonfinancial, or better yet, pre-financial targets. A&M can help companies looking to build ESG into compensation programs navigate this quickly evolving area, including:
- Which metrics to utilize
- How to weight the ESG goals within the compensation programs
- How to structure the metrics (objective vs. subjective)
RELATED INSIGHTS
Alvarez & Marsal (A&M) brings a dedicated team of compensation and benefits professionals who assist the C-suite and boards in designing new long-term incentive (LTI) plans and maximizing the effectiveness of existing plans.
The rise of ESG has dramatic and surprising implications for human capital and companies must reevaluate the ways they attract, maintain and cultivate the best possible workforce for long-term success.
Reducing the gender pay gap remains an important business consideration, but organizations should watch out for red flags and red herrings when conducting their analyses.
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At A&M, we regularly work alongside our clients’ existing advisors to ensure that they benefit from our extensive experience in managing Code of Practice 9 enquiries.
A&M Benefits Reference Guide
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Many of the limits that pertain to qualified retirement plans and benefit plans are set by the Internal Revenue Service (IRS) and are subject to cost-of-living adjustments. In 2026, employees will be able to increase their retirement savings and contributions to health savings accounts as a result of the increased limits. The IRS limits for 2026 are summarized in the table below along with certain important compliance deadlines.
