11 Companies Rewarding Failure: Financial News – Yahoo! Finance

It is interesting to see these compensation articles. I think that too much of an executive’s reward structure is based on short-term goals and the executive has often disappeared when the company collapses in the long-term (5-years or more.)

Why not develop a long term incentive system along the line that sets up long-term and short-term goals for an exec, with commensurate rewards based on whatever metrics the board wants to use. But, the exec can not collect the short-term rewards unless the long-term goals are met.

So, if an exec gets a bonus for raising the stock price 20% one year, and has a 5-year goal of doubling customers, the exec doesn’t collect the 1 year bonus for at least 5 years and then only if the customer base has doubled.

There are a fair number of variation on this theme; the main point is to hold an exec’s feet to the fire to ensure the long-term success of a company and not to allow an exec to gut a company to promote short term success. (I wonder what would have happened to the dot-com bubble if no one got any rewards until the long-term goals were realized?)

This view on compensation is independant of any view that annual compansation in excess of the US president’s salary should be treated and taxed as corporate profits.