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I think it's more a lack of long term thinking. Leaders that do not have a long term stake in the company but who can profit from a rise in the stock price in
by stretchwithme 7y ago
I think it's more a lack of long term thinking. Leaders that do not have a long term stake in the company but who can profit from a rise in the stock price in the short term.
What if executives could only sell their shares five years after they acquired them? What if they experienced losses when the company does?
Boards and shareholders need to get smarter. I'm hesitant to regulate it but I see no problem the SEC rating companies for their incentive structure. It should be updated whenever leadership changes or the company changes compensation.
Companies lad by founders who still have most of their wealth in company stock should garner the highest rating. Companies that don't require CEOs to invest and who allow CEOs to exercise options stock and sell stock whenever they want might get the lowest.
How executives can sell stock should be part of that rating. If executives can only sell an amount of stock gradually, say in 8% increments every month for the next year and can't change that schedule, that is safer for shareholders than allowing them to sell whenever they want.
- jacques_chester 7y ago> What if executives could only sell their shares five years after they acquired them? This is something like what Salomon Brothers did. Results were mixed. That said, I like the idea of spreading them out a bit. CEOs and top execs do behave a lot like how agency theory predicts, it's just that if you can come up with the perfect monitoring scheme, you don't need a CEO.
- onlyrealcuzzo 7y agoIt'd be interesting if executives and upper management were paid in dividends for 30 years. That way, you have a vested interest -- even after you leave the company -- to make sure it does the right thing.
- stretchwithme 7y agoDefinitely something to that. 30 years might seem like too long a period. But if you want your pension to stay healthy, build it to last. That message would be pretty clear.