Under compensation theory, the process of developing a compensation strategy requires
identification of desired outcomes and specific behaviors to achieve those outcomes. Incentives
motivate individuals capable of affecting desired outcomes. Outcomes are assessed and
incentive awards distributed based on the level of outcome achievement. If companies used such
a model, compensation structures would differ for companies with different strategies, time
horizons, and risk tolerances. If companies use compensation surveys as the basis for CEO
compensation allocations and then attach metrics at the end to meet government regulations
regarding incentive pay (see Figure 2), compensation structures would be homogenous, as was
found