Big Bonuses for CEOs? Not So Fast

After shareholders' dismal 2008, corporate boards are being watched
closely while they decide whether to dole out traditionally huge
bonuses

By Ben Steverman

updated 4:00 p.m. PT, Sun., Dec. 7, 2008

Chief executives of U.S. companies, used to receiving million-dollar
bonus checks at the end of the year, should prepare to get by with a
lot less this time around.

As corporate
boards begin discussing 2008 bonus awards, it is a near certainty that
U.S. CEOs will get smaller checks -- and many will not get bonuses at
all. To blame are the plunge in the stock market, the financial crisis, the downturn in the economy, and also an environment that makes hefty bonuses toxic in the arena of public opinion.

Still, many wonder how much boards will really cut back on one of their
favorite ways of rewarding senior executives. A steep drop in bonus
awards would be a marked contrast with previous years....

entire article - http://www.msnbc.msn.com/id/28070187/

...But the biggest compensation conundrum facing
corporate boards may not be 2008 bonuses or keeping execs long-term,
but what to do about 2009. "How do we design next year's incentive plan
to be sure we can get the best performance out of executives in a very
difficult time?" Lindner asks.

Almost no one --
neither economists, executives, investors, nor policymakers -- knows
what to expect from the economy and financial crisis in 2009. Set the
bar too low and you'll be accused of coddling executives. Set the bar
too high, and a bad economy could make your goals impossible to meet.

One way to solve
that problem is to judge CEOs by how well they perform compared to
competitors, rather than setting specific goals, Lindner says.

After so much
went wrong in 2008, many investors would be justified in wondering if
any executive deserves a bonus. But companies still need good CEOs, and
that's especially true in the current economic environment. The trick
for compensation committees: Finding the right level of reward -- and
restraint -- in these tough times.