Most people think incentives are reward mechanisms. Increasingly, I think it is more accurate to view them as risk instruments. That may sound like an odd distinction, but it helps explain why so many debates about executive remuneration seem to generate more heat than light. We tend to assume that
OPINION: Why risk matters more than reward when setting incentives
The primary challenge with designing executive pay is structuring rewards that link risk to long-term value while aligning with shareholder interests.