Published by:
Harvard Business Publishing
Length: 16 pages
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Abstract
Attention to how much CEOs are paid diverts public attention from how they are paid. A statistical analysis of executive compensation concludes that top executives are not receiving record salaries and bonuses; annual changes in executive compensation do not reflect changes in corporate performance; and with respect to pay for performance, CEO compensation is getting worse. Compensation policy not only shapes how top executives behave, it also helps determine the kind of executives an organization attracts. Boards of directors must reform their compensation practices and adopt systems that reward outstanding performance and penalize poor performance.
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Abstract
Attention to how much CEOs are paid diverts public attention from how they are paid. A statistical analysis of executive compensation concludes that top executives are not receiving record salaries and bonuses; annual changes in executive compensation do not reflect changes in corporate performance; and with respect to pay for performance, CEO compensation is getting worse. Compensation policy not only shapes how top executives behave, it also helps determine the kind of executives an organization attracts. Boards of directors must reform their compensation practices and adopt systems that reward outstanding performance and penalize poor performance.