The Harvard Law School Forum on Corporate Governance https://corpgov.law.harvard.edu The leading online blog in the fields of corporate governance and financial regulation. Sat, 04 Apr 2026 11:30:51 +0000 en-US hourly 1 https://wordpress.org/?v=6.5.8 https://corpgov.law.harvard.edu/wp-content/uploads/2024/02/cropped-photography-4-e1706898544564-1-32x32.png Annual Incentive Plan Design and Trends – The Harvard Law School Forum on Corporate Governance https://corpgov.law.harvard.edu 32 32 Annual Incentive Plan Design and Trends https://corpgov.law.harvard.edu/2025/10/14/annual-incentive-plan-design-and-trends/?utm_source=rss&utm_medium=rss&utm_campaign=annual-incentive-plan-design-and-trends https://corpgov.law.harvard.edu/2025/10/14/annual-incentive-plan-design-and-trends/#respond Tue, 14 Oct 2025 11:32:11 +0000 https://corpgov.law.harvard.edu/?p=176935?d=20251011225825EDT Posted by Andrew Gordon, Equilar, Inc., on Tuesday, October 14, 2025
Editor's Note:

Andrew Gordon is a Senior Director of Research Services at Equilar, Inc. This post is based on his Equilar memorandum.

Annual incentive plans serve a valuable function as an interim measurement of progress towards longer-term goals. Unlike performance share awards, which have a more rigid construction due to complex equity accounting rules and higher levels of shareholder scrutiny, annual bonus plans offer a greater flexibility in plan design, consideration of individual performance, and use of discretion. This report summarizes the current state of annual incentive design and trends in the Equilar 500, the 500 largest U.S. public companies by revenue.

Within its IPAC tool, Equilar features a Payouts and Weightings module that captures granular incentive plan data related to plan features, metrics and payout curves for performance-based awards granted to the CEO. For this analysis, we compared 2024 (defined as fiscal years ending between May 31, 2024 to April 30, 2025) against 2023 (defined as fiscal years ending between May 31, 2023 to April 30, 2024) for 432 Equilar 500 companies with both years of data. We further removed fully discretionary plans, leaving 404 formulaic plans for 2024 and 403 for 2023, which serve as the basis for the remainder of this report. Discretionary plans generally have no material plan features or structured metric measurement and instead rely upon a holistic measurement of performance, as determined by the board of directors.

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