Linking exec pay to the long term

Money changing hands in Washington, D.C.


Steve Chiotakis: Executive pay has been a big topic of discussion lately. Today, there's talk about making pay-outs commensurate with long-term performance. The Wall Street Journal says New York Attorney General Andrew Cuomo, Congressman Barney Frank, and other Democrats are behind such a plan. Here's Ashley Milne-Tyte.

Ashley Milne-Tyte: Short-term thinking has fueled Wall Street pay for years. Bonuses are doled out every year, and executives are offered huge pay packages when they sign on.

Paul Hodgson of The Corporate Library says it's high time the emphasis switched to rewarding executives for long-term performance.

Paul Hodgson: It's a set-up that's been adopted elsewhere in the economy in fact, where you might promise a cash incentive or a stock incentive, but you don't deliver it until that performance has been achieved over three, four or five years.

But some are worried about the government having a hand in that kind of shift.

Charles Elson directs the Weinberg Center for Corporate Governance at the University of Delaware:

Charles Elson: Every time the government has gotten itself into the compensation business, they've managed to make a bad situation an awful lot worse.

Elson says he supports pay being tied to long-term company performance. But he says boards of directors should make those rules. Otherwise, he says, shareholders will lose out.

In New York, I'm Ashley Milne-Tyte for Marketplace.

Log in to post1 Comment

THe way things are, the Board of Directors (BoD)are just figure heads for cases where the CEO can stack the BoD with his or her people.

Share holders cannot do anything about CEO incentives.

In addition, the laws over the years are stack in favor of management.
People owning common shares of any companies are just not able to influence outcomes in management decisions.

We really need new laws to prevent looting of share holders and reasonable CEO incentives.

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