Thursday, September 25, 2008

Why are CEOs being rewarded for self-serving packages

Share |
It really is not good enough for US Treasurer Henry Paulson to come out and say he will make concessions to Congress to have caps placed on US salaries. There are several problems with this:
1. Weak regulation - the government is not even looking at white collar crime; since they make no resources available for it.
2. Too late - what is the point of capping salaries 20 years after the problem started. The last generation of CEOs has retired or converted their options into shares, and in most cases sold out.
3. Too little - The CEOs have engaged in self-serving action at the expense of shareholders. In Australia that is a breech of duty. Not only should those funds be recouped, but directors should no longer be entitled to options.
4. Standard of value - The standard of value by which CEOs are paid should be the same by which shareholders are paid, the share price. The difference is that the CEO should be paid a basic salary plus a performance incentive based on the extent to which he out-performs the broad index. This would mean the best CEOs are attracted to the best performing sectors, which is where you want the best people. Though someone might argue you should compare them with same industry CEOs. I have some sympathy for that view.
Andrew Sheldon

ConvinceMe.Net - Anyone up for a debate?