STI Design
Plan structure — metric weights, payout curves (threshold / target / max), and design diagnostics.
Design the short-term incentive plan: metric selection, weighting, threshold / target / max payout curves, individual-performance modifier, and funding rules.
Approved philosophy (P4P posture), peer plan prevalence (Executive Comp · STI Prevalence), funding-pool model, finance forecast.
Per-metric weight, payout curve, plan diagnostics, and total weighted payout at scenario performance levels.
STI plan effectiveness is bound by goal-setting discipline upstream. Plan-design tweaks won't fix calibration issues — flag separately to the Finance partner.
Four-metric plan (Revenue 35%, Margin 25%, Strategic 25%, ESG/People 15%) is sound. Threshold payouts at 50% are right-sized; max at 175-200% is generous vs the 150-180% peer median. Confirm with comp committee.
Open the Payout Curve Modeler (Executive Compensation) to stress-test plan funding at various performance levels.
Revenue weighting at 35% is the highest single weight. Combined with the Operating Margin metric (25%), 60% of STI funds on top-of-house financials. Strategic + ESG/People at 40% provides modifier discipline but isn't the funding driver.
If both revenue and margin miss in the same year, the plan effectively pays at threshold (~30% of target). Calibrate goals against the finance plan to avoid a structural payout shortfall.
(1) Hold the four-metric structure. (2) Stress-test the FY plan at -3%, -5%, -10% revenue scenarios in the Payout Curve Modeler. (3) Document the Strategic-metric scorecard with measurable sub-components.
ESG metric introduction (FY24) doesn't yet have a track record — comp committee will want to see how it scores. Bring the Year-1 scorecard to next meeting.
- Is the comp committee comfortable with the 200% max on Revenue, or push down to 175% (peer median)?
- Strategic metric is currently 25% — does the committee want sub-component disclosure in proxy?
Payout-at-max assumes linear interpolation; some peers use stepped curves. Confirm interpolation convention.
Open Incentive Payout Curves (Executive Compensation) to stress-test plan funding.