More Complaints About Executive Pay

Executive pay is always controversial, but this article points out one of the real problems – that what people don't like is superstar pay for mediocre performance.

Many experts see the continuing rise of executive compensation-and the continuing lack of a demonstrable link to performance-as a symptom of a massive failure of corporate governance. Greater pressure from shareholders is generally regarded as the only real antidote. But critics of perceived executive excess have been frustrated by shareholder passivity, which is sometimes blamed on the short time horizons of many investors.

So is there a cure? Certainly, fuller disclosure would help, argues Lucian Bebchuk of Harvard Law School and co-author of a recent book, "Pay Without Performance: The Unfulfilled Promise of Executive Compensation". If there were proper disclosure of forms of executive pay such as pensions, supplementary pensions and deferred compensation, then it would be easier for shareholders to see whether chief executives are being rewarded for genuinely good work.

Incentives matter. But if you structure executive pay such that money is the primary incentive, you get people that are motivated first and foremost by money. In most cases, that isn't who you want. The best people usually play for the love of the game.

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I read an interview with Michael Dell years ago where the reporter asked him why he didn't just retire and buy a yacht to sail around the world. He said that any wealthy person could do that, but how many could run a multibillion dollar company like Dell? Some people just like challenges.

  • Sorry Grasso. It’s early here on the left coast.

  • J

    I’ve got to agree with LH – BODs in cahoots with senior management are a root, if not the root of the pRoblem. Bankruptcy law in particular should treat board members MUCH more harshly than they do now.

  • It really boils down to a question of incentives. What exactly is being rewarded here? The answer is obvious.

  • aa


    This complaint is about the very high compensation of the Magma Design Automation Inc. executive

    management at the expense of share holders money, while the company is doing poorly. The stock price

    is dropped from $13 to $0.99, and the executive compensation is more than doubled. Following is the

    summary of the compensation from yahoo financials:

    Pay Exercised
    Mr. Rajeev Madhavan , 42
    Chairman and Chief Exec. Officer $ 740.00K $ 0
    Mr. Roy E. Jewell , 53
    Pres, Chief Operating Officer $ 740.00K $ 1.19M
    Mr. Peter S. Teshima , 50
    Chief Financial Officer, Principal Accounting Officer and VP of Fin. $ 411.00K $ 0
    Mr. David H. Stanley , 61
    Corp. VP of Corp. Affairs and Corp. Sec. $ 397.00K $ 0
    Mr. Saeid Ghafouri , 50
    Advisor $ 856.00K $ 346.00K

    Moreover, there is a $ 856.00K salary for Mr. Saeid Ghafouri, as an Advisor. He does not work with

    the company and there is no reason to pay him such a high salary. I need a complete investigation

    into these issues and the management salary should be reduced and share holders money should be