Tuesday, December 02, 2008

Dealbook - Putting a Value on a C.E.O. - NYTimes.com

The NY Times has an interesting look at CEO pay and how having the government playing a role may lead to different outcomes. Using Citi as an example, the article asks how pay can be structured to bother create proper incentives and reward managers.

Dealbook - Putting a Value on a C.E.O. - NYTimes.com:
"...many people argue that Wall Street’s approach to compensation helped get us in this mess to begin with. Bankers were rewarded for taking risks that they clearly failed to manage. So something has to change.

The trick, of course, is to dole out enough rewards to keep executives working, and working hard, but not to dole out too much....firms need to find ways to keep and attract talented people who can make smart decisions, without lavishing pay on them or rewarding them for shoddy performance."

Which is easier said than done.

Remember there are two big questions with respect to pay that often get blurred. The level of pay (how much) and the form of pay(how do we pay them). And as we change one, the other must be accounted for as well.

What would I liek to see? Many CEOs (and others) get zero this year. If you get large rewards for good times, you must be penalized in bad times. Indeed, in some of these instances, you would really like to see the managers pay the firms back for what they made in the past as their systems led to the current problems.

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