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"Reducing comp as punishment would also not make sense, for obvious reasons." If leadership is financially incentivized for positive outcomes, why shouldn't th
by germinalphrase 4y ago
"Reducing comp as punishment would also not make sense, for obvious reasons."
If leadership is financially incentivized for positive outcomes, why shouldn't they carry downside financial risk as well?
- andsoitis 4y agoIf a leader makes poor decision after another, they will be penalized by the board (either in job prospects, having this job, or compensation). Ultimately, the comp for the CEO is set by the board and that is determined by supply/demand (which inputes performance of the CEO). Penalizing someone for one mistake in anticipating the future would make a company so risk averse that returns would be very low - not a good outcome for the owners.
- snotrockets 4y agoIf that leader is a founder of a company with a dual-class stock, they won't
- andsoitis 4y agoIn that case, there's a natural incentive for the leader to do things that make the business successful long-term. It is in their best interest.
- ketchupdebugger 4y agoleadership's financial incentive is basically stocks which does carry the downside of losing value when the stock price goes down. The problem for us normals is that leadership gets paid life changing amounts of money every year, so losing a couple of millions is not that big of a deal.