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URS Corporation (URS - Analyst Report) recently announced some significant changes in its executive incentive structure to align the employee’s performance with the company’s core metrics that include cash flow generation, organic growth and the value returned to stockholders. The new structure also builds upon URS’ proven philosophy of pay-for-performance.

The new structure was designed and approved by the Compensation Committee of URS’ board of directors. The new awards for the senior most executives will be applicable from 2014. They will now be based on GAAP earnings per share, free cash flow and return on invested capital (ROIC), as compared to the earlier solo metric of net income. This structure will ensure that the goals of the employees and the company are in sync going forward.

URS’s Compensation Committee has designed the long-term incentive structure for these senior executives to align the weightage of performance-based restricted stock awards (PSU) and time-based restricted stock awards. Earlier, both the metrics had the same weightage. However, under the new compensation program, PSU will get as much as 60% weightage, whereas time-based restricted stock awards will get the remaining 40% weightage of the total awards.

Under the previous program, PSU were awarded based on the net-income that was measured over a couple of years. The new program entails that the PSU’s be awarded while considering both ROIC and net-income over a three-year period. The new program also entails that company’s total stockholder return (TSR) should exceed the same for Russell 3000 Index, the performance-period for which is three years. This is to ensure that PSU are vested above the target number of shares, in consistence with the earlier program.

URS currently has a Zacks Rank #3 (Hold). Other companies that can be considered at the moment include AO Smith Corp. (AOS - Snapshot Report), VSE Corp. (VSEC - Snapshot Report) and Rexnord Corp. (RXN - Analyst Report). While AO Smith Corporation and VSE Corp. both carry a Zacks Rank #1 (Strong Buy), Rexnord Corporation has a Zacks Rank #2 (Buy).

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