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Heads I Win, Tails You Loose-The Need to Reform Executive Compensation
Prucell, Noel
Prucell, Noel
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Abstract
Executive compensation and incentives systems have been shown to be dysfunctional, misaligned and short-sighted. Greed and narrow self-interest have thrived, and risk and stewardship have been too often ignored. Added to this, the enormous disparities in remuneration levels between top executive pay levels and average wages is raising serious questions about equity and fairness that poses material risks to corporations. Reform of executive compensation is essential and if blunt and problematic regulation is to be avoided it needs to be led by boards. In the reform process, boards need to embrace responsible stewardship, enlightened governance, and sound risk management in reining in the excesses and realigning the incentives. In particular, incentives need to be restructured to better align executive behaviors with long-term value creation and to remove pressures and temptations on executives to pursue narrow self-interests.
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2011-03
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With permission of the license/copyright holder