Directors will either be rich already, and so the incentive of doing it right is ameliorated, or they are not, which means that the incentive to massage the numbers will be great.
This policy sounds superficially fine but is frivolous. Directors should be paid a fair wage and if they help the company outperform, based on ambitious targets, then they should receive bonuses.
Zero payment sounds nice but brings with it hidden dangers and moral hazard.
Onésimo Alvarez-Moro
See article:
Warren Buffett, the billionaire investor, on Thursday defended Coca-Cola's decision to make boardroom pay entirely dependent on company performance, arguing that the unprecedented move would align the interests of directors and shareholders.
Coke said on Wednesday that from this year its directors would be paid only if the beverage company met a target of 8 per cent compounded annual earnings growth over a three-year period.
See full Article.
Also see Coke shakes up directors' pay.
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