AIG’s recent decision to cancel 160 meetings and conferences, including recognition events, begs the question: Does a company have a legal obligation to provide alternative rewards to the qualifiers of canceled incentive trips?

Not in most cases, according to meetings industry attorneys we talked to. “In my opinion, an incentive trip is not ‘compensation earned’ in the same way that salary is,” says Jim Goldberg, Goldberg & Associates, Washington D.C. “Rather [it] is a discretionary corporate award which can be changed or canceled at any time.”

Jonathan Howe, president and senior partner, Howe & Hutton Ltd., Chicago, adds that the terms of an incentive contract “generally contain some kind of out that will allow a company to cancel.” The situation could be different if the incentive is specifically described as a bonus, he says. “That’s another story—it’s a contractual obligation.” However, Howe knows of no instance where legal action has been brought against a company failing to reschedule a canceled incentive.

Whatever the legal ramifications, Bill Boyd, president and CEO of Sunbelt Motivation & Travel Inc., Dallas, believes that it is shortsighted for companies to simply cancel an incentive trip. “No company wanting to survive when this economic downturn ends would cancel a trip without some kind of similar or better replacement,” he says. “Whether the incentive trip is earned by a sales force, a customer base, a distribution network, or [as part of] an employee loyalty program, canceling the program without adequate monetary [or other reward] adjustments would be just plain stupid.” Such behavior, Boyd says, would alienate the very people a company relies on for its success.