By Justin Lahart

May 26, 2016 1:57 p.m. ET

Earnings before the bad stuff can do good things for executive pay.

Last year was tough for many companies, so many asked investors to imagine what things would have looked like if the tough things had never happened. This led to the biggest divergence since 2009 between pro forma results, which exclude items such as restructuring charges and stock-based compensation, and results under generally accepted accounting principles, or GAAP.

But these adjusted metrics aren’t just showing up in earnings releases. Pro forma figures have been proliferating in annual proxy statements, too. There, when used with compensation metrics, they can help executives draw bigger pay packets.

Research firm Audit Analytics finds that the term “non-GAAP” appeared in 58% of proxies for companies in the S&P 500 that have released them so far this year. Five years ago, that term showed up in 27% of proxies for current S&P 500 constituents.

There is nothing improper about using non-GAAP measures as long as they are disclosed properly. And corporate boards decide on the measures they want to use for compensation purposes. Plus, there is an argument to be made for sometimes excluding items from results for compensation purposes. If, say, a natural disaster hits a company with expensive repairs, perhaps an adjustment is in order.

But other items that often get excluded in pro forma results, such as layoff-related charges, do seem like a reflection of management’s performance. And boards have too often shown a willingness to set awfully low bars for executives to clear.

That, though, can disadvantage shareholders and wreck the idea of pay for performance. In that vein, the dramatic rise in the number of companies using pro forma measures to determine bonuses would indicate the balance between shareholders and executives is being skewed in executives’ favor.

Indeed, an examination of the most recent proxy statements from companies in the Dow Jones Industrial Average shows about a dozen of the index’s 30 constituents had annual pro forma earnings well in excess of GAAP ones and used the pro forma ones in annual bonus calculations.

Coca-Cola’s pretax income increased by 3% under GAAP. But after adjusting for the impact of the stronger dollar and “nonrecurring items,” the income growth figure the Dow component used for bonus purposes rose to 5.5%.

Absent adjustments, Dow member Home Depot reported operating income of $11.77 billion last year. But the pro forma figure of $12.06 billion it used for compensation figures excluded the impact of the strong dollar and costs associated with its 2014 credit-card data breach.

Pfizer earned $1.11 per share last year under GAAP. But the Dow component excluded a number of items from the pro forma results it used for bonus purposes, pushing earnings per share to $2.20—above the $2.05 it had targeted for its annual incentive program. Without that adjustment, the chief executive’s bonus under the company’s annual incentive program could have been significantly lower. While in most years, the pro forma earnings the pharmaceutical company has used for compensation purposes have exceeded GAAP, in 2013 they were lower.

Several other Dow components with pro forma earnings in excess of GAAP mentioned those measures in their compensation discussion, but left it unclear how they affected bonus amounts. Some used non-GAAP measures other than earnings, such as economic profits, to set bonus amounts.

More worrisome, using pro forma to set bonuses provides executives with an incentive to exclude items not because they should, but to hit performance bogeys. That creates a risk that pro forma results say less about a company’s underlying health than about executives desire to get paid more.

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