Southern California Edison: Incentive Program:

➢ Result sharing payouts is based on business unit and SCE performance. This is good because it takes care of both departmental as well as overall company business progress and targets.

➢ SCE performance measured in percentage of annual operating income and translated into a multiplier of business unit was also a good feature of the measurement.

➢ Executives’ compensation program was designed perfectly. This program with three elements - salary, bonuses and long term incentives had three main objectives

The management in uncontrollable situation:

➢ When the crises hit in 2000, the situation was difficult and out of control of the management. However, the management handled the incentive plans well in presence of uncontrollable factors. For example the payouts to be paid in 2001 were postponed and the employees did not complaint because they knew the crises situation.

➢ The employees have no control over the crises. The bonus for the year 2000 was not paid to executives and there was no increase in base salary of executives even then any of the employees did not leave the company. There could be two potential reasons for this. One main reason could be that the executives had no any other job offer because of overall energy crises and the other could be that the company’s incentive system was so good that employees preferred to stay in the company.

Recommendations:

➢ Since the flexible performance factor has not