Opposing view: 'Surgery with a hatchet' - 16 Apr 2009

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Opposing view: 'Surgery with a hatchet'


Let private sector, not government, shape new world of corporate pay.



By Dennis Nason




Did Wall Street bonuses get out of control? Absolutely. Is this a problem for government to fix? Not so fast.


The
regulatory path for reining in bonuses is likely to be surgery with a
hatchet — cuts for all. But, since essentially everyone has recognized
that the Wall Street bonus structure needs to be changed, the
institutions involved already have no choice but to rethink the whole
system, which could lead to more innovative, efficient, effective
solutions.


 



 


Change in bonus structures will not be uniform. A lot of companies
still strive to "treat everyone the same," resulting in fat paychecks
for mediocre performers.


But that is changing. Already, there is
a growing trend away from simply cutting pay and other compensation for
everyone, and toward a strategy of enhanced compensation for the most
valuable employees — with value defined by rigorous performance
measurement. Top officers' compensation will be measured against a
totality of performance, not just immediate share prices. That's a lot
different than past practices.


Top companies still need to
attract and reward top talent, but they will do so in a much different
environment, one that is much more transparent and scrutinizing.
Members of Congress may not be very interested in the intricacies of
executive compensation, but they do know that bonuses have gotten out
of control, and they have said loud and clear that if the private
sector doesn't do something about it, they will.


The talent pool will grow accustomed to the new world of executive compensation. So will


For more information on Letting the private sector re-set executive compensation.


Posted by Dan Walter


Performensation: Equity Compensation for High Performance Companies.

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