Compensation, based on residual income, will be tied to quantifiable achievement of the company's objectives. The company's objectives must be focused on growing the value of the company.
This link should then align the goals and objectives of each level and position of management with those of the shareholders / stakeholders.
We use Residual Income (RI) as the basis for the compensation system.
Here is RI in its simplest form:
Net Profit After Taxes - Cost of Capital = Residual Income
