360.150 Principles for the Establishment and Operation of Incentive Compensation Plans

Executive Guideline No. 34, February 15, 2005; July 17, 2008; Amended 7-28-20.

The President of the University in accordance with the authority delegated by the Board of Curators of the University of Missouri must approve all incentive compensation plans prior to implementation or material revision as established by Section 320.030 (Executive Order 6) of the Collected Rules and Regulations. Incentive compensation plans, as defined here, do not include Award programs that distribute a fixed monetary award to the awardee or extra compensation for teaching or the executive compensation and performance program. Chancellors will approve and forward incentive compensation plans generated on their campuses with the basis for their recommendation. The following are general principles for establishment and operations of incentive compensation plans.

1. Plan Development: The development of the plan should be discussed with those involved in or affected by the plan and include involvement of the department and/or unit leader with faculty and/or staff consultation, dean of the college, and University administration.
2. Plan Elements: The incentive plan should be clearly defined and include, but not limited to, a description of the following:
   
   1. The specific activities or behaviors being rewarded by the incentive.
   2. The goals of the incentive program and how these goals will further promote the University’s missions.
   3. How the plan clearly links the incentive to the University’s short and long-term objectives.
   4. How the plan ensures a proper balance of responsibilities for the units involved, as well as the faculty or staff participating in the plan.
   5. The plan must define participant eligibility and selection criteria, identify the incentivized behavior, the formula used to calculate payment, the source of funds, and the mechanism for distribution.
   6. A termination date, not to exceed five years, should be included. A new Incentive Compensation Plan may be submitted for Presidential approval to continue or modify the terminating plan during the last year of the initial plan period. Incentive Compensation Plans should be communicated and should be part of the overall employment consideration, prior to the beginning of the incentive period.
3. Limits to Total Compensation: All incentive compensation targets must be justified as part of the plan. In cases where the potential incentive compensation component is a substantial proportion of the base salary, special consideration should be given to the relationship between the total compensation desired to pay the employee and the balance between the base salary and the incentive payment to achieve that desired compensation goal as related to market and operational parameters.
4. Review of the Plan:
   
   1. The elements of the incentive plan, including the distribution formula, should be extensively reviewed periodically, with provision that the incentive plan may be revised or terminated, if the plan fails to meet its specific goals, or the plan over time has resulted in an imbalance of the incentivized behaviors and the other professional duties.
   2. The individuals comprising the review group used in D.1. should be free of any personal or financial conflicts of interest with respect to the incentive plan.
   3. The review process for the incentive plan must be explicitly described in the initial plan and fully disclosed to all employees eligible under the plan (e.g. frequency of review, composition of review group, categories of recommendations, etc.).
5. Existing Incentive Plans: All existing incentive plans initiated prior to the date of this executive guideline must undergo a review employing the principles articulated above. Based on the review, appropriate revisions to the incentive plans should be made at the beginning of the next incentive period in order to bring them to conformity.