What boards should understand about how their company's key performance indicators or metrics are chosen, developed and reported.
Boards and management regularly use key performance indicators or metrics to oversee their businesses. These metrics typically cover financial and operating matters and are specific to each company and within industries. Metrics may be financial or operational, qualitative or quantitative, absolute or relative, or focused on short- or long-term performance.
Metrics are critical to understanding and managing trends in the business and are often used to determine compensation. As metrics may garner close attention from analysts and investors, boards should understand how their companies’ metrics are chosen, developed and reported.