Executive Pay in a Time of Economic Crisis

I know I will be viewed as a heretic by many compensation consultants, but I can not remain silent on the issue of limiting, capping or otherwise controlling executive compensation for those companies that end up directly benefiting from the massive and unprecedented bailout proposal.


I keep hearing things like: "Companies won't be able to get the best minds and talent without having an unlimited ability to offer compensation".  I have thought long and hard about it and believe that controlling pay by linking it to success is such a bad idea.  The "best minds and talent" should only be defined AFTER they have proven themselves successful.  Simply categorizing someone as great or brilliant and paying them without required performance is irresponsible in this circumstance.


Many of the people being identified as the financial system saviours are the exact same people who were in charge while the walls collapsed around them.  I do not believe that this qualifies them for pay without performance.  I also believe that these people are driven, passionate and confident and will work to acheive the goals laid out for them.  Some will fail.  Some will earn more than they should.  None will (or should) earn for failure.


My position contradicts much of what I have read from executive compensation consultants around the country.  Of course, demanding performance in return for fair compensation has its risks.  The best and the brightest may choose to test the waters in other industries or locations.  Companies may significantly out perform expectations and people may get paid far too much.  The entire bailout may fail and executives may jump ship mid-stream if they see know upside to continue paddling.  Even with these risks, I believe that my taxes (and yours) should only be used to pay those who have done the job required.


This is an extraorindary time and it requires extraordinary solutions.  I would like to hear what you have to say about this issue and what solutions you might provide to the government and industry if asked.


 


Best Regards,


Dan Walter

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