Mike Kesner is a Partner at Pay Governance LLC. This post is based on his Pay Governance memorandum.
Introduction
The impact of tariffs and potential tariff refunds will require companies to closely examine 2025 and 2026 incentive plan payouts to ensure fairness to management and shareholders. The unfortunate timing of both the imposition of new tariffs in 2025 and the possibility of a tariff refund—should the Supreme Court determine the new tariffs were unlawful in the coming weeks—makes it highly unlikely that incentive plan targets incorporated these unplanned events. This may require after‑the‑fact compensation committee decision‑making and possibly the exercise of discretion to ensure a fair outcome. To the extent companies have incorporated certain tariffs into 2026 incentive plan targets that turn out to be unlawful, adjustments may also need to be made to those targets.
