A person I respect very much published recently an article on the subject of executive compensation; the article contained, among others, two ideas I found contradictory.
The idea that resonated well with me: the important issue is not how much executives get paid, but how they get paid and for what reasons. In essence, we should step back from numbers which may not compare well across industries and focus on principles. Great!
The idea that resonated poorly with me: the executive folly that contributed to the current economic mess was a natural result of having built incentives for short-term / high-risk gains in the executives’ compensation package. In other words, “The system was flawed, not human nature.” Not so great.
Need I really articulate what is wrong with this idea?
The implied principle may as well be: “Thou shall not lie, cheat, steal or kill… unless thou hast the incentive to do so.”
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