If we want to make any meaningful headway on improving executive compensation practices, we have to first go back to principles: compensation should provide an incentive for the compensated executives to do what the compensating organization wants them to do.
The first implication is that it doesn't make much sense for an organization to compensate executives for doing something they can't do. If an electric utility compensates an executive for making sure winters are really cold and summers are really hot (because those are the conditions under which the company makes a pile of profit), it wouldn't be spending wisely because the executive has zero control over the weather. The executive has to be able to influence the desired outcome through diligence and intelligence.
See full Article.
Posts
