CEO Comp: Their Personal Assets Should Be At Risk

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  Luis905512/28/07 Reported as spam
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  CEO Compensation - alternatives

  I am not sure that net profits would not be as easily manipulated as you claim stock prices can be - the CEO can time certain transactions for their accounting effect. Moreover, linking CEO compensation to net profit might even provide a disincentive to engage in otherwise valuable risk taking ventures such as M&A that might negatively impact net profit in the short term due to certain charges, but might add shareholder value later.
  
  As for putting the CEO's net assets at risk some might argue that their net worth is already at risk, to the extent that generally the majority of compensation comes from options and bonuses that do not materialize unless certain milestones are met.
  
  I think that shareholders might be better served by letting market forces do its job when the Board of Directors look for CEOs external to the US - widen the pool so that CEO salaries go down

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  upshift12/28/07 Report as spam
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  CEO Comp

  I agree that profits and share price are related. (i.e cut R&D and implement large personnel cuts to increase profits and ultimately share price.)
  
  However what if companies provided a base salary and bonuses would only accrue after a period of X years. Thus targets and milestones would have to be sustained rather than reached within the next quarter.
  
  After all isn't a CEO supposed to have a long term outlook?

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  bholstein01/03/08 Report as spam
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  Long term vs. short term

  I think this is the key factor. Yes, CEOs can manipulate net profit for a quarter or two, but that would take away from net profit in years two and three, let's assume. So if a CEO has a five-year contract or the assumption is that he/she is going to be in the job for five years, the CEO would have the right incentive to manage for the long term and not savage R&D in the short-term, for example. Bill Holstein

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  darinp12/28/07 Report as spam
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  Slashing Your Way to a Bonus

  I don't agree with the Porsche model as far as tieing a bonus to profits goes. I have consulted with a couple of companies that used a similar tactic and the leadership teams made short-term decisions that inflated profits by cutting out G&A expenses that left the companies fragile and crippled. While you cannot cut your way to profitability in the long-term, you can certainly make your company more profitable by removing cost from the business over a two to five year period without improving Accounts Recievables.