Changing the Incentive Plan In 1996 the CEO at ICF Kaiser faced a bonus plan that required earnings per share of

$0. 1 0 or better. After losing a large contract, this target seemed out of reach. However, on the last day of 1996, the company sold its interest in a coal mine, allowing it to meet the performance target and providing a bonus payment of $ 175,000 to the CEO. The compensation committee of the company's board of directors considered this sale legitimate because the proceeds from the disposition were needed to make a debt repayment and because the company routinely sells off minority investments. Many compensation experts believe that compensation committees regularly adjust the parameters of incentive plans, or even change compensation plans completely, to allow senior management to earn incentive compensation when committee members believe that the executive compensation is too low. Although there is considerable evidence that compensation committees are willing to boost pay in bad times, there is relatively little evidence that they are prepared to scale back pay when the compensation seems excessive.

Required What do you think of the practice of a compensation committee's managing the parameters of an incentive compensation plan after the fact in order to provide an executive with a target level of compensation?