http://seattletimes.nwsource.com/html/businesstechnology/2009444136_apusaigbonuses.html

I say NO!!!!

‘Appropriate’ in terms of…? What I mean here is that, according to what we Comp people normally call “compensation equity”, “appropriate” can mean internal equity, external equity-competitiveness, “risk-reward equity” if we feel that individual or team results and behaviours are ok, even “ethical equity” if we feel that earning a certain amount of money is “too much”, and many more things.

What is “appropriate” and what is not? Who decides that? The media, the public in general, the governments, the shareholders? And on what basis? How should they decide that? On opinion? Just on share price and dividend decrease? Or on other company figures? Or on some or all of the above mentioned “equities”?

Probably large figures are clear: perhaps having your nice, average CEO make $600,000 a year in fixed and perks, $500,000 in short term variable and $500,000 in exercised SOs is “wrong” in 2008, if the company reduced sales and profits. But what if other companies did worse? Or what if that reduction was with no lay-offs and no salary freezes?. And overall, what is really “wrong”? Making $300,000 in total is “good” and then the guy can be considered a good boy?. This line of reasoning is strange: so if I buy a series 3 BMW with the money I made as top exec, that is fine, but if I buy a Lamborghini -hey that’s too much, that is wrong. If my children go to an average, middle of the road school, that’s OK, but if I want to give them the best possible education (which is expensive), that is wrong.

Are we in fact considering that Top Execs hold an effective supply-side quasi-monopoly on labor force that, as any other monopoly, should be broken/limited? When did we discover that? Weren’t we in a free market economy? If so, then those people maybe are there because they were “bought” among heaps of competitors and were in high demand, and the rewards they make are there because they won a long, difficult competitive race. Maybe it’s just that other competitors want those positions for themselves, and criticise “high” rewards because they envy them.

I said all of the above to offer some ideas and with all due respect – no offence intended at all to anyone. Any thoughts?

Mario Herndandez
HR & Organization Consultant

I have to admit while I look funny, it feels really good. I now understand why my boys have continually done this.

In public companies it is different, and like Casey says, it’s the compensation committee that approve the plans, and their needs to be better accountability there (until the past few years of increased regulations and scrutiny, it was often more of a “old boys” club, but much less so today). It’s time for compensation committee to stand up to CEOs and to expect performance before pay, and to be accountable for how pay at the CEO level is determined.