Negative Discretion

Negative discretion is a right many incentive plans (both short-term and long-term) reserve for the compensation committee to reduce a calculated, formulaic payout after the fact. In the case of PSUs, this can occur even once performance has been measured and a Performance Multiplier applied. In most plans this runs one direction only, downward; a smaller number of plans reserve discretion in both directions. Negative discretion is more commonly expected in short-term or annual bonus plans, which is part of why it surprises people when it shows up in a PSU plan instead.