Return on Invested Capital : Important Considerations

The attraction to Return on Invested Capital (ROIC) as a performance measure for executive incentive plans is both push and pull in nature. The push by investors has increased awareness among corporate boards and senior leadership, with more and more companies implementing the ROIC financial measure in incentive plans. While it is relatively complicated to initiate a ROIC-based long-term incentive (LTI) program, successfully doing so provides incentive to manage equity and debt (for example, invested capital) in the best and most advantageous way. This article provides tips on implementing an effective LTI based on ROIC