The illustrious Mr. Hammer has been attempting to illicit a response from me regarding Executive Compensation. His latest post Why Executive Salary Caps Don€™t Work requires a response.
Maybe I missed it in his post, but, I don’t see where Mr. Hammer separates the “Public” domain from the “Private” domain. Two very different worlds.
First a confession. I’ve been known to manage and exploit a compensation plan to it’s fullest. Actually, I am quite proud of the fact that I’ve made some CEO, CFO and HR types very, very unhappy. Getting the most out of a compensation plan is EXACTLY what you should expect from a top-level sales person. Exactly why a solid compensation plan is the very foundation of assembling a top notch sales organization – from top to bottom. A well designed compensation plan will direct behavior and result in the desired outcome.
Executive Compensation is, in my mind, an entirely DIFFERENT matter. In the private sector? No holds barred. Do what you like, as long as it’s legal. Compensate any way you like and in any amount.
In the Public sector, the rules are – and should be – different. That’s why the SEC and several other agencies exist. (Don’t get me wrong, I’m not a regulation proponent)
The “C” level pay in public companies deserves the attention and scrutiny it’s receiving from the media. Why? Because the deck is stacked by the key shareholders and their cronies placed on the compensation committee.
As an example, the “minority” share holders (people like you and me) of a very large national homebuilder attempted to have the compensation of the CEO brought in to line. We all know the status of the home building industry…. The result – the largest shareholders (primarily the “family”management) squelched the attempt. Today the CEO continues to be one of the highest paid CEO’s in the nation. The share price has dropped by 50%, earnings are down and write-offs are ridiculous (probably means they won’t be paying much in the way of taxes, either). To this the Velvet Hammer says “Sell the stock if you don’t like it!”
The rumor on the street is “Class Action Suit.” Maybe the system works better than I thought? Maybe I should have been a lawyer?