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You will know an effective approach...

... by the energy used by executives to evade it.

And the idea of basing compensation on longer term trends...
Well, it's unlikely to be popular, because chief executives in particular tend to stay at companies for a short time. They want to obtain as much as possible while money is being shoveled onto them and just go.

But the executives might even accept a version of the scheme, because over time the market always goes up. Someone who is paid a fortune because a company for which he once worked is following the general trend would probably be pleased.

One reason the market goes up is that employees have to put their retirement funds somewhere. 401(k) accounts are a major boon to Wall Street because anyone who calculates the amount available when he can't work quickly realizes he needs a return larger than he'd get from bonds.
The people who control retirement money are those who value layoffs. Thus, people's pension money goes to reward those who toss them out of jobs.

But the best gimmick going is signing bonuses and large severance agreements. The huge signing bonus says the executive is coming to the company for money. If the offer had been smaller he wouldn't have come. The severance package negotiated long before says the executive who took the job from greed gets more money faster if he fails.

The truly successful executive figures out a way to get a huge severance package from one company and immediately gets a huge signing bonus from his next victim... ahm... employer.


To me, the only solution is fixed pay for executives. Maybe an individual who knows he gets the same amount no matter what he does will try to help the company in order to avoid boredom. But even if he uses his time only to play golf, his employer is probably better off than suffering from whatever scheme the executive would have used to increase his payout under a pay-for-performance approach.

Posted by: Anton Philidor   Posted on: 06/04/05 You are currently: a Guest | Members login | Terms of Use

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