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Incentive pay plans emphasize nonfinancial measures.

A study of executive compensation practices at 1,400 companies conducted by William M. Mercer, Inc. found many companies used nonfinancial measures in determining incentive compensation.

Thirty-five percent of the companies used customer satisfaction measures in the incentive payment formula and another 33% planned to do so. The rate of on-time, delivery of products or services was used in the programs of 33% of the companies and was being considered by 24% of those polled.

Among financial measurements, 48% of the companies surveyed examined internal financial performance (such as cash flow trends) to determine incentive payments rather than external yardsticks such as stock price movements.
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Publication:Journal of Accountancy
Article Type:Brief Article
Date:May 1, 1993
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