Short-term incentive
Also called STI, annual incentive, annual bonus plan.
A one-year cash incentive plan. Payouts usually appear in Bonus or Non-Equity Incentive Plan Compensation, not in equity columns.
What it is
A short-term incentive (STI) is variable pay for a period of about one year, almost always cash. In the SCT it appears as Bonus (if discretionary or non-plan) or Non-Equity Incentive Plan Compensation (if earned under a plan). CompensationBase mix bars group those two columns as incentives.
STI is the annual scorecard: financial metrics, operating goals, and sometimes individual modifiers. It is not LTI, even if a company pays a small portion of the annual bonus in stock.
Why companies use it
Annual cash keeps executives focused on this year’s budget and gives the committee a lever that pays in cash, not dilution.
Target STI as a percent of salary is a standard benchmarking statistic (for example, CEO target bonus 150% of salary).
Pros
- Fast feedback: pay follows the year just closed.
- No share dilution when paid in cash.
- Metrics can match operating plans more tightly than three-year TSR.
Cons
- Can encourage short-termism if LTI is weak.
- Adjustments and committee discretion can loosen the formula.
- SCT readers see the payout, not whether threshold, target, or max was the intent at the start of the year—until they read the CD&A.
Examples
Target vs actual
Target STI $2 million, actual payout $1.4 million (70%) because revenue missed. The $1.4 million appears in the non-equity column for that fiscal year.
Discretionary overlay
The formula yields $2 million; the committee adds $500,000 for a transaction. Depending on plan design, the extra may stay in the incentive column or move to Bonus.
On CompensationBase
Annual cash incentive payouts usually appear in Bonus or Non-Equity Incentive Plan Compensation. Mix bars group those two columns as incentives.
Related terms
- Bonus
Cash paid outside a pre-set incentive plan. On CompensationBase, Bonus is grouped with non-equity incentives as “Incentives” in the mix bar, but it is a distinct SCT column.
- Non-equity incentive plan compensation
Cash paid under a pre-established bonus or incentive plan, reported in the SCT Non-Equity Incentive Plan Compensation column. Distinct from a discretionary Bonus.
- Long-term incentive
Multi-year awards, usually PSUs, RSUs, or options, meant to align executives with longer-term results. The full grant-date value still lands in a single SCT year.