What do you think of Mark Cuban's recent blog posting on Exec Comp?

This Dallas Morning News column was adapted from an item he posted on BlogMaverick.com and is also available at DallasNews.com.

"There is a game played by CEOs with the corporate issuance of
lottery tickets, otherwise known as stock. Stock can be issued as
warrants, options, restricted or unrestricted stock. No matter what you
call it, every CEO asks for equity, knowing that the only goal is to
hit the jackpot.

Every CEO hired looks to grab as much equity equivalents as he
can and do everything he can to get that stock price up while
periodically liquidating the stock and stuffing the cash in his bank
account.

There is absolutely nothing wrong with doing so. Any CEO who
doesn't take advantage of this golden ticket is an idiot. I would guess
that more than 95 percent of CEOs hired to run companies with a market
capitalization of a billion dollars or more amass more than $10 million
in equity very quickly.

Those who manage to hold on to their jobs a while can get past
the $25 million in equity mark pretty quickly and reach $50 million in
10 years. It's actually pretty tough to screw up and not get there.

Why? Because you have the entire mutual fund, hedge fund and brokerage industry doing all they can to help you.

Think about it. You can't turn on CNBC or Fox Business without
seeing cheerleading for the market to go up. Every man, woman, child,
fund, index or interested party who buys the stock is doing everything
they can to get the stock of the company to go higher. They don't
really care how you run the company as long as the stock price goes up.

Heck, even if they did care, shareholders don't really own
anything and have zero say in the company. It's the ultimate in social
networking. Everyone who owns the stock belongs to the fan page for the
stock, and they are telling everyone they can how wonderful the company
is and why the stock will go up, all the while praying that it does.

With all of that social networking power, how can CEOs not get rich?

The problem is that there is a huge disconnect between the CEO and
shareholders doing well and those who work for the company doing well.

Yes, it's true that stocks can hit 52-week, or even multiyear,
lows. Yes, it's true that CEOs see the value of their holdings shrink.
But unlike lottery tickets, whose value goes to zero when you don't hit
the numbers, CEO equity positions retain their upside. History has
shown that if they go far enough underwater, they will get repriced
and/or reissued – all in the name of keeping the CEO happy.

So while CEOs may get "less rich" for a while, the game is stacked to get them happy really fast when the upturn comes.

The pressure from Wall Street is to grow earnings forever, no
matter what it takes. This isn't a problem when a company is doing
well. But when the economy hits a bump, everyone wants to know what the
CEO will do to get the price back up. This, as they say, "is where the
CEO earns his pay."

Everyone who works for that company is at risk – of losing
their jobs, benefits, raises, you name it. Employees live in the
corporate cash zone, while CEOs and the top few in management live in
the equity/lottery ticket zone.

Those in the cash zone always take the first hit. People,
places and things that consume cash are the first things to go because
cash expenses immediately reduce earnings. If you or anyone like you
consumes cash, unless someone upstairs thinks you generate a
straight-to-the-bottom-line return, you are about to become a corporate
ghost. You'll be memorialized as a cut to increase earnings and
mentioned in a press release that Wall Street will cheer and use to
push up the stock price.

What makes me sad is that I think if given a choice, most of
us would choose to hold on to our shares and accept an expanded
price-earnings ratio for some period in exchange for people keeping
their jobs.

I would love to receive an e-mail from a company saying something to the effect of:

Dear Shareholder,

We are facing a difficult decision that we would like
your feedback on. Our earnings per share last quarter were 20 cents
and, for the entire last year, 80 cents. Because of a downturn in
business caused by XYZ factors, we face the choice of making 10 percent
less or cutting headcount and related expenses in order to maintain our
earnings and possibly even grow our earnings a couple cents this year.

As a shareholder, we would like to ask you whether you
would consider allowing us to retain these valued employees. We
recognize that it would require you to accept a PE multiple 10 percent
higher than the current market. We hope you would be willing to make
this concession. We think the jobs this will save will return far
greater value to shareholders over the long run. We look forward to
your vote.

Unfortunately, this is a fantasy that can't happen in this country. Which brings us back to CEO pay.

The only way to change this is to put CEOs in the cash zone.
Make companies generate 100 percent of their compensation in cash that
will be 100 percent expensable in the quarter paid.

That's not to say the CEOs can't own stock. Hell, yes, they
can own stock. But make them buy it on the open market or as part of a
program that's available to every company employee on the same terms.
They are getting paid enough, and if they believe in their ability to
run the company, they can put their money where their mouth is.

Shareholders tend to ignore how much stock goes to management,
but they don't ignore cash. CEO cash compensation will go up, but total
compensation will come down.

More importantly, CEOs getting paid huge sums in cash will
stand out like a sore thumb when things aren't going well. They will be
treated like everyone in the cash zone and held more accountable for
their work.

The rich can still get richer, but everyone shares in the risk."