This article argues that the Expectations-Based Management (EBM) measure proposed by Copeland and Dolgoff (in the previous article) is essentially the same measure that EVA companies have used for years as the basis for performance evaluation and incentive compensation. After pointing out that the analyst-based measures cited by Copeland and Dolgoff do not provide a basis for a workable compensation plan, the authors present the outline of a widely used expectations-based EVA bonus plan. In so doing, they demonstrate the two key steps in designing such a plan: (1) using a company's "Future Growth Value"-the part of its current market value that cannot be accounted for by its current earnings- to calibrate the series of annual EVA "improvements" expected by the market; and (2) determining the executive's share of those improvements and thus of the company's expected "excess" return. 2006 Morgan Stanley.
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