4 ms·
The amount of money makes one wonder about corporate governance. How can shareholders be okay with it?
by cactusplant7374 4y ago
The amount of money makes one wonder about corporate governance. How can shareholders be okay with it?
- anonymouskimmer 4y agoThey're okay with it because: 1) Originally giving large amount of stock to the C-suite was seen as a way of locking in the motives of executives to enrich the corporation (or at least bump the share price), not just themselves. 2) They stayed okay with it, and even increased the options, because it was now standard practice. And if they didn't okay it they wouldn't get the 'best' executives. The problem with all of this is that some shareholders are longer-term holders than others. And if executives are jumping ship to get a higher payout every couple of years, then they are only incentivized to boost the share price for those couple of years (or until their options mature). So executive's motivations are only in sync with the best monetary interests of short-term shareholders. You'd think the shareholders would design compensation policies to encourage long-term executive retention and thus long-term "shareholder value", but this doesn't seem to be the case.
- cactusplant7374 4y agoBerkshire companies don't have outrageous compensation plans. There are plenty of companies that will perform well without the hundred million dollar motivation.