Comments on: Executive bonuses – Justified?

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Thu, 08 Oct 2009 11:43:45 +0000

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By: Baldy

Baldy — Thu, 08 Oct 2009 08:25:52 +0000

I fully agree with you, we want the good execs to join. What you want to avoid is them making bad decisions, like Escom & SAA cutting down on maintenance to make it appear like they’re growing profit, while they’re actually just setting up the next one for massive failure while enriching themselves. So there has to be a solution in the middle somewhere, where good decisions get compensated, and the bad ones get ripped apart.

By: Jaco Pretorius

Jaco Pretorius — Thu, 08 Oct 2009 08:07:32 +0000

If the executive is only compensated for long-term performance he probably won’t join your company. Keep in mind that a company can often have terrible results no matter what the CEO does. For example, if the industry goes through a significant change (or a global recession) the CEO has very little influence over the company’s results. Executives know this and the best ones will only join your company if they are compensated accordingly – and these are the ones you want.

By: Baldy

Baldy — Thu, 08 Oct 2009 07:56:38 +0000

You need them to take risks to take a company forward. It should be calculated risks, and if the exec knows that he only gets his bonus if the risks he takes pay off long term, then we’re just forcing them to take ONLY calculated risks and not short term blinkered options

By: Jaco Pretorius

Jaco Pretorius — Thu, 08 Oct 2009 07:51:18 +0000

Executive compensation is quite a hot topic at the moment and I don’t think there is any magic solution. The key is that companies can’t really offer low yearly compensation because they need to attract the best CEO’s! You have to compare what your company is offering to what other companies are offering. The best solution seems to be to offer a mixture of annual compensation (salary), stock options and shares. The problem with only offering stock options is that executives are inclined to take bigger risks – that is probably a problem with your solution as well.