Page 397 - Bruce Ellig - The Complete Guide to Executive Compensation (2007)
P. 397
Chapter 7. Short-Term Incentives 383
0 1 2 3 4 5 6
Un- Very Out-
Grade Marginal Acceptable Good Superior
acceptable Good standing
35 0 33.0% 67.0% 100.0% 133.0% 167.0% 200.0%
34 0 32.0 63.0 95.0 127.0 158.0 190.0
33 0 30.0 60.0 90.0 120.0 150.0 180.0
32 0 28.0 57.0 85.0 113.0 142.0 170.0
31 0 27.0 53.0 80.0 107.0 133.0 160.0
30 0 25.0 50.0 75.0 100.0 125.0 150.0
29 0 23.0 47.0 70.0 93.0 117.0 140.0
28 0 22.0 43.0 65.0 87.0 108.0 130.0
27 0 20.0 40.0 60.0 80.0 100.0 120.0
26 0 18.0 37.0 55.0 73.0 92.0 110.0
25 0 17.0 33.0 50.0 67.0 83.0 100.0
24 0 15.0 30.0 45.0 60.0 75.0 90.0
23 0 13.0 27.0 40.0 53.0 67.0 80.0
22 0 12.0 23.0 35.0 47.0 58.0 70.0
21 0 10.0 20.0 30.0 40.0 50.0 60.0
20 0 8.0 17.0 25.0 33.0 42.0 50.0
Table 7-33. Aggressive annual incentive awards as percentage of salary
Salary Minus per 1 Bonus Target Plus per 1 Maximum
Midpoint
Grade Percent Percent Percent Bonus Percent
35 $1,095,200 2.50 25.0 1.25 37.5
30 609,000 2.00 21.0 1.00 31.0
25 355,700 1.50 17.0 0.75 24.5
20 217,900 1.00 13.0 0.50 18.0
Table 7-34. Bonus percentage adjustments by corporate performance
It is used for corporate profit goals as well as division goals, where appropriate. As can be
seen, this is an abbreviated schedule showing only every fifth grade. However, the reader can
easily interpolate to determine the factors for missing salary grades.
Division A attains 105 percent of its profit goal, while the corporation only meets 98
percent of its profit objectives. Query: What is the total fund available for division A? Since
in this plan three parts of the fund are based on division success and one part on corporate
success, it is necessary first to determine the weighted average guideline percentage. This is
done for each job incumbent in each salary grade. An example would be a person in grade
30 in division A. Adjust the bonus target percentage in Table 7-31 of 21 by 5 points (i.e., 5
1.00) to 26 since the division did 105 percent of target. It is then given a weight of 3, for a
