Discussion about "Bebchuk, Cohen, and Spamann in Project Syndicate: Paid to fail - Harvard Law School News"

Bebchuk, Cohen, and Spamann in Project Syndicate: Paid to fail - Harvard Law School News

This is a short article covers a recent study of the pay at Lehman and Bear Stearns done by a team from Harvard.  The thrust is that the execs at these firms made a lot of money (see below) off of stock options for the years before, and including, the demise of their companies.

In reading this, I can't help but wonder if we may be controlling equity awards a bit backwards for some companies.  In some cases, perhaps the award of equity should only be made for hitting performance goals and the vesting should only occur once it has been proved that the goals met, are supported by continued success.  Very few companies currently structure their plans this way.

I think it would be hard to get this right and it would be hard to get many companies to buy into this concept, but the final product may be better.

by the way, this is my favorite part (bold is mine).

In our study, “The Wages of Failure: Executive Compensation at Bear
Stearns and Lehman Brothers 2000-2008,” ...

Most importantly,
the firms’ top executives regularly unloaded shares and options, and
thus were able to cash out a lot of their equity before the stock price
of their firm plummeted. Indeed, the top five executives unloaded more
shares during the years prior to their firms’ meltdown than they held
when disaster came in 2008. Altogether, during 2000-2008, the top
executive teams at Bear Stearns and Lehman cashed out about $1.1 billion
and $850 million (in 2009 dollars), respectively.