Seeking Alpha

Should stock price be used as a benchmark for management pay?

  • The NYT's Grethen Morgensen looks into whether companies should continue to use rising stock prices as one of the main considerations for corporate performance and executive compensation.
  • "Seventy percent of executives' stock option gains are attributable to the market's movement as a whole," says Nell Minow of corporate governance analytics company GMI Ratings. "We are basically paying CEOs for floating on their backs when we should be paying them to win races.
  • Mark Van Clieaf of Organizational Capital Partners believes a better performance measurement would be a company’s net returns on its invested capital. "Management should be providing value that exceeds its cost of capital," says Van Clieaf.
Comments (1)
  • Of course it should change so CEO's are paid for real value add, not temporary stock increases based on news blurbs & CEO's presentations.

     

    Pay for stock increases is recursive. Stocks go up because they think the CEO has added real value. So CEO's pay goes up for stock increases. Increases that are based on "real value add' that isn't a direct part of the equation in CEO's pay.
    13 Oct 2013, 01:23 PM Reply Like
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