Deliver and You Get Paid

Nothing reinforces more the view that corporate chieftains are overpaid than the sums awarded CEOs given the boot. To be sure, some executives earn their lavish pay packages. And companies now accept in principle that compensation should be tied to performance. But in practice the disconnect between pay and performance is a persistent and troubling problem at many large public corporations. But what if sophisticated shareholders or truly independent and savvy directors were in a position to set compensation so it aligned with their interests? If that sounds like a fantasy, consider how private equity firms compensate the executives of their portfolio companies. The pay-for-success model most private equity firms have adopted could be a model for paying public company managers.

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