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Negative Discretion

A provision in a stock grant that gives the company the right to reduce the amount paid out according to specified factors, such as economic conditions, where the company stands in relation to competitors, or the behavior of the executive/employee.

Example: This provision occurs in an executive's performance share award where the payout would be at the maximum amount upon reaching certain goals or ranking relative to competitors. However, the board triggers this provision to reduce the award size because of a severe market downturn.
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