Bollocks

These problems have been compounded by the structure of executive pay. Over
the last 20 years, remuneration packages for company directors have increasingly
been made up of stock options, annual bonuses and so-called ‘long-term
incentive plans’, which are in fact based almost entirely around short-term
metrics of financial performance (see figure 3.9). These are widely regarded as
having distorted incentives for company directors, encouraging them to focus on
short-term share price movements rather than long-term growth.

Equity packages tend to vest rather slowly.

Both Rex Tillerson and Gary Cohn (yes, US but still) would have got theirs over the 5 years after they left the company if they hadn’t gone into government.

3 thoughts on “Bollocks”

  1. LTIPS aren’t all *that* long-term – five years is popular. That may be longer than the average politician’s horizon but is too short to measure the impact of a major R&D project that can transform a company (upwards or downwards).
    Certainly annual bonuses can lead to distorting results (Tesco?).
    So there are problems with the modern structure of executive pay which is a result of campaigns, especially in the media, about the previous structure of executive pay!!

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