Incentive Plans and Non-GAAP Performance Measures
Certifying incentive compensation payouts can often involve making adjustments to GAAP financial measures. Many compensation committees prefer to use non-GAAP measures in order to avoid arbitrary payouts that can sometimes result from GAAP elements that management does not have any control over. But using non-GAAP measures can also draw the ire of shareholders and advisory groups, especially if they result in more favorable payouts than GAAP measures would.
In this article published on CFO.com, we discuss the rationale for adjustments to GAAP measures, and highlight which adjustments are more readily accepted and which are more controversial. You can read the CFO.com article here.