Boards protected CEO bonuses as tariffs threatened business. Now, as Iran disrupts trade, CEOs may get more protection
View original at finance.yahoo.comBoards protected CEO bonuses as tariffs threatened business. Now, as Iran disrupts trade, CEOs may get more protection When Apple CEO Tim Cook and his executive team received their performance targets for fiscal 2025, the board set a modest bar for bonus payouts…
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Calendar year companies approved 2026 goals about two or three days before Iran news broke, giving no opportunity to incorporate conflict into goal setting
60% confidenceCommittee set goals that reflect strong financial results commensurate with projected business and economic conditions
60% confidenceUncertainty about Iran conflict duration makes it like looking into a crystal ball
60% confidenceTariffs had unexpected magnitude on financial results and incentive calculations after goals had been set
60% confidenceTarget incentive goals should be achievable but stretch to align executive pay with shareholder experience
60% confidenceSome improvement in weak performer bonuses is due to business improvement, but companies also softened the blow through various compensation techniques
60% confidenceCommittee focused on underlying business performance rather than absolute growth rates when setting targets
60% confidenceIf companies make adjustments and give executives big payouts during significant layoffs, the optics would be seen negatively in the press
60% confidenceCompanies will look for precedent in how boards responded to Iraq invasion in 2003
60% confidenceThe intent when goals are set is to account for what is in and out of executive team's control and set realistic goals
60% confidenceBoard set fiscal 2025 performance targets at same level or below prior year's results citing 'trade policy' and 'uncertain macroeconomic outlook'
60% confidenceCompanies that made tariff carve-outs last year might still consider using that lever this year if tariffs significantly impact them
60% confidenceCompanies setting targets with their budget still align them to what finance thinks is achievable
60% confidenceTariff adjustments reflect net impact after management actions including shifting 30% of manufacturing from China to Southeast Asia and Mexico
60% confidenceCompanies can widen performance curves and adjust targets to make it easier for executives to earn bonuses
60% confidenceBoards are having conversations about approaches they might consider at year end regarding Iran conflict impact
60% confidence