Friday, June 3, 2011

Don't You Wish You Could Get Paid More for Poor Performance?

If you're a CEO, should you want your company's stock to nosedive?  Probably not.  Will you be paid better if it does?  There's a good shot, says Roger Martin writing in the Harvard Business Review:

As far as CEO compensation goes, under the current stock-based compensation model, it is unambiguously better to have your stock plummet and then partly recover than to have the stock stay steady over the same period. Though they wouldn't want to admit it, the crash of 2008 wasn't all that bad for the vast majority of big-company CEOs. With the exception of those few CEOs who were sacked, most had terrific air cover: "Our stock may be down 50% but so is everybody else. Really, I'm doing well, all things considered."
Even better, CEOs got tranches of options and/or grants at super-low prices — in some cases lots of them to keep the CEO in question from being depressed that his/her existing options were 'so far underwater'. As the market dragged their stock prices up with everyone else's, these CEOs made out like, well, bandits.