Management Incentives

Was looking at a companies Compensation Plan for CEO and COO today and came across this bonus calculation:

"The annual bonus program of the CEO and the COO is calculated as a percentage of the adjusted
consolidated pre-tax profit of the Corporation. The adjustment to consolidated pretax profit is a capital
charge deduction. The capital charge deduction is obtained by multiplying the Corporation’s
percentage cost of borrowing by the prior year-end shareholders’ equity. The CEO and the COO
receive 3% and 1.5% respectively of the adjusted consolidated pretax profit in cash..."

I am interpreting this to mean:
Pre-tax Profit - (% cost of borrowing x shareholder equity from previous year) = Adjusted Profit
Adjusted Profit x 3% = CEO Bonus

What's confusing to me is that this formula seems to incentivize keeping shareholder equity lower (since mathematically this would lead to a larger bonus).

Is my interpretation correct and if so, how does this make sense?
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