Bad Signals
Put differently, executive compensation these days reinforces a class structure within the enterprise that is antithetical to its effective functioning. Because of its symbolic nature, executive compensation as currently practiced sends out the worst possible signal to everyone in the enterprise.
One alternative, of course, is to pay bonuses to everyone, perhaps according to their base pay. That solves one problem but not another: how to ensure that the goodwill is not being cashed in by everyone, collectively. Once again, who is to come up with the measures that assess performance correctly?
So, again, there is but one solution: Eliminate bonuses. Period. Pay people, including the CEO, fairly. As an executive, if you want a bonus, buy the stock, like everyone else. Bet on your company for real, personally.
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Get Rid of Executive Bonuses (for Public Co CEO’s) - WSJ.com Sawickipedia: Yes, Yes, Yes. Given my general philosophies on business (and politics as an extension) will probably find my agreement w/ this opinion piece surprising but I am a big believer in fairness. Crony capitalism is a huge cancer on our business and political fabric and CEO pay has largely been designed in that environment. Corporate boards are rigged, public-company CEO pay is rigged and the stock market has many rigged-like elements unfortunately. I’ve never bought the outrageous compensation claims touted by public CEO’s and boards that the market drives these insane packages. And as have studies have shown again and again rock star CEO’s and their outrageous pay rob shareholders. Many large private companies are often better governed because they allow for real governance and real corporate structures. Not being able to rig one’s pay (against the interest of companys’ shareholders, employees and customers) with bogus stock market metrics is one reason private companies often seem like better places to work with way more employee and customer empathy. |
