The Business Execution Blog

The Business Execution Blog


April 11th, 2006

Pay for performance doesn’t apply – to the boss

09value.graphic.190Over the weekend, the NYT (again) tackled the subject of top executive compensation. But this time, they added some cool charts and graphs to illustrate how utterly out of synch pay has become with corporate results.

My favorite is this one which contrasts some of the worst offending companies (where pay went up when a company’s performance went down) with some of the best values in CEOs (where performance went up but pay didn’t keep pace).

As more and more companies move to a system where performance is correlated directly to pay for their employees (as well it should be) it seems only logical that the same would be true for top executives. One would think that a scenario in which employees are denied raises of a few percentage points because the company didn’t have a good year, while the CEO walks off with bundles of cash would make “employee engagement” somewhat of a difficult job.

The Times also questioned the impartiality of compensation consultants in a separate piece, from which I truly enjoyed this particular quote from Warren Buffett:

Too often, executive compensation in the U.S. is ridiculously out of line with performance,” he wrote in his most recent annual report. “The upshot is that a mediocre-or-worse C.E.O. — aided by his handpicked V.P. of human relations and a consultant from the ever-accommodating firm of Ratchet, Ratchet & Bingo — all too often receives gobs of money from an ill-designed compensation arrangement.

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This entry was posted on Tuesday, April 11th, 2006 at 6:55 pm and is filed under News & Technology, Strategic HR, Talent & Performance Management. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.

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