Tie exec and upper-management pay to very-long-term profitability and market performance. For example, consider stock that doesn't vest at all until five years have passed. No taking intermediate profits. An exec who leaves before five years is out gets the portion earned... but still not until five years have passed.

Being a corporate exec is both a privilege and a responsibility. Shareholders should demand it be treated as such. I see no evidence that great leaders won't take the job if they don't earn $20MM/year.

I would think all the colege professors would defend the right of executives to receive these outlandish salaries and bonuses. After all, it is probably these executes that are contributing to their colleges.

In answer to the article question, my answe is that executives are making too much pay and bonus. The answer is to cap them at no more than 20 times what the lowest worker is making and end the rip off and prima-donna greed.

Million dollar salary, bonuses, perks, private jets and when stocks go down everyone wants more money. When I loose investment profit it is lost period.
As far as sports go if they don't perform then they are out!
This country is in a recession and exec's salary should not keep going up. Banks fail and the big guys still get paid. What is wrong with this picture?

I worked with executive human resources for 15 years and saw the nonsensical pay these guys and girls were making. It’s obscene to think that someone is worth several million dollars a year when the company they run does not provide a secure place to work for anybody other than the top 1% of the company. I’ve seen executives complaining about a 1 penny rounding error on their pay check. Most of them have no sense of what it is to live in the real world, on a middle class income, with the fear of no job and no benefits next week. They are over paid politicians who can’t do anything for themselves. On the other hand, if we don’t pay them this money, someone else will and they will go to the highest bidder, even as their country falls into economic collapse.

Huge salaries are generally due to lack of overall corporate planning.

If an organization uses correct objectives and targets, with tied correlation to long-term profits, all business will follow a expected (or natural) market behavior. Risks would be correctly evaluated and business ethics would be present.

But if you have a very short-term targets, businesses aren't made as safely as they should be. When the bonuses are tied to wrong objectives, normally you have overboosted sales, but often assuming very high risks for the corporation, creating a big problem for future profitability.

Then the organization needs a hero, i.e., a highly competent exec, to save the business. Premium salary and bonuses are asked by any reasonable person to compensate the career risk demanded for saving a sinking corporation.

When employees are being asked to take pay cuts, executives need to do the same. To maintain morale and productivity, it is important to show that recovery efforts are not just on the backs of the front line people.

Many academics may try to justify this because many of them do little actual work themselves and get paid a load of money for it.

Reality is executive pay/bonuses has gone up more than anyone else's pay in recent years, no reason for this. It is apparent that much of that was based on money the company actually didn't have, thus unjustified. Fact is executives are overhead, meaning needless to the daily operations of the company. Yes, they may have responsibilities. However, for the daily operation of the company, many executives could take a day/week off, and the rest of the company would never blink an eye. However, if someone "on the line" takes a day/week off, either others have to pick up the slack, which can affect their performance, or customers are affected by not getting as immediate service, which could cause the customers to switch companies.

It is like a lifeguard without the ultimate responsibilities of a lifeguard (if a lifeguard makes a mistake, people get hurt if not die). Do lifeguards have responsibilities? Yes. Can people still swim without them? Yes. The amount of work lifeguards do for a company to provide a service is minimal if any. Realistically, people could still swim without a lifeguard.

Thus, with executives, a company can still survive without an executive. Thus, why are they paid so much when so much of their actual work is so little? I would like to know just what work do executives do. I have asked that question a lot recently and have only gotten, "They are responsible for. . ." That tells me what they are responsible for, not what work they do to assure what they are responsible for actually works. When, in fact, all executives do is just go everywhere and make sure everyone is doing their job. In reailty, executives do very little work.

Not to mention, I find it fairly ridiculous that people are actually given bonuses for simply doing their job; that is what their salary is for. And, in this case, with many of the financial institutions having caused the financial and economic collapse, the executives are still being given bonuses or apparently doing their job poorly? Get real. First, they have taken our money, unjustiably in many cases, and left the company. Second, if any regular worker was to go interview for a job with the resume of some of these executives, having only stayed at companies 2 years or less in many cases, regular workers never get considered for the job. But, executives still get hired?

I think the general arguments (or defenses) and analyses have missed the true points completely. CXO's are compensated on overall growth and performance of the company. If they focus on return of shareholder value and equity only, they are really not being motivated to focus on true organic growth but rather on cost cutting. And what is one of the most frequently attacked line items? Labor - as in off-shoring, etc. Now tell me, Company X has flat growth but is doing fabulously in profitability because they eliminated 1000's of jobs. Now people are on the bread line, using state and federal aid, and not dispersing money into the system. However, Company X shareholders get a better return and the CXO's get the best return in artificially inflated compensation. How does this help Main Street and/or the investors, the bulk of which are the Main Street residents? Aren't we being short-sighted here? Wouldn't it be better to make compensation a "skin in the game" approach? Longer term, more metrics? Maybe this will weed out the chaff - those that don't know the difference between ethics and gouging.

The only people or groups who should be concerned with executive compensation levels or terms are the company's stakeholders, period. Everyone else is a spectator, can chear or snear, but should not feel that they have a vote.

The most obvious stakeholders are the owners (shareholders) represented by a board. If the compensations get out of whack, shame on the board, and tough luck for shareholders. They'll sort it out when the stock price falls (seen the attrition rate of CEO's lately?). If the US Govenment decides to participate in propping up a private company, then their influence on compensation should be the result of direct negotiation of the transaction, either through partial ownership or some other terms of the agreement.

Customers are also stakeholders and vote with their willingness to do business with the company. To the extent that they buy services from a company, the government has the means to apply pressure (and does) through their contracting regulations.

Corporations need to be perceptive, and boards across our economy probably need to be more attentive to their role as overseers. Negative public sentiment can hurt a business through lost sales and through increased government safety and environmental regulations. That is one reason why a company should consider its employees and community stakeholders as well.

The growing public sentiment, however, that the government should somehow begin directly regulating executive compensation risks the weakening of a market economy that, while in current crisis, has made the US into the world's leading economy. China has become an economic powerhouse because they have moved toward permitting market forces to regulate prices and pay, and away from central government dictates.

Let's not lose our way as we work through our current situation.

I agree that we should tie "a large portion" of exec and upper management compensation to long term stock performance. However, I would add tying a portion (a smaller portion) to short term results, PLUS, some kind of incentive on corporate "citizenship". I define one measure of corporate "citizenship" as domestic employment.

For years, one issue with our system of quarter to quarter emphasis is that executives were incented to layoff and/or offshore domestic employees to improve "the numbers". Now, all of the companies that have benefited from TARP are laying off thousands of workers (which I do not believe has been included in "the estimated cost" of these bailouts. Maybe some of that TARP bailout money should have been required to go to provide larger severance packages for laid off employees. Maybe executive bonuses should be reduced by the amount of benefit from laying off workers.

I am not sure of the exact right formula, but I think congress/president should modify TARP and future bailouts to include help for affected workers, and the executive bonuses should provide a balanced incentive on long term, short term, and "citizenship".

if you lose investor's money and still give yourself a big prize for losing that money, i call that stealing. it should simply be illegal for a public company to reward wasting investor's money. no profit, no bonus.

Talk about disconnect. These executives have failed to perform, lead, and manage. What are they being compensated for? Who will bail out my company. You can bet your last dollar if my company doesn't have capital we don't have a party. The new norm should be responsibility not greed. Why award bad performance. If I was on their boards I would say get rid of them! There are plenty of great people out there that can and will step up to the job. We are entering a new era.

"They screwed up" says the blogger as if corporations operate completely autonomously. Was the millions of wasted dollars in SOX spending a decision of these executives? Was lending money to poor credit risks also their decision? Does pork delivered to your competitors with better connected elected representatives make it the executives fault for not paying their Representative or Senator enough? If you're REALLY serious about how tax money is spent, and I seriously doubt it, why look at just the bailouts and not the whole system of spending tax dollars? Why not limit to the same dollar amount proposed for executives with TARP money to ex-politicians for seven years who make money lobbying our tax money away? Why not allow competition to the largest no-bid government contract that the National Education Association has with our public schools? You'd be saving a LOT more money for the tax payer than limited executive pay for a few thousand people. But then again, I don't think that saving tax payers money is really what is behind this kind of proposal.

If an exec has the leadership and skill to earn a company huge profits, their pay should have no limits. They are worth every dollar they are paid. That said, a large portion of their pay should be held in escrow for perhaps five years. If it is later discovered that they mistated earnings or otherwise manipulated the books then money is taken back. Additionally, all pay should be based on a small salary with the rest paid as a bonus based on performance. The truly good execs would get paid what they deserve. The rest would not receive a ton of mopney for running a company into the ground. As for all those that say that the inflated salaries are needed to attract the top talent, I say that the top talent has enough confidence in themselves that they would accept a position with a salary tied to their performance. The ones that want guarantees up front are going in expecting to fail.

Let's also remember what got us into the financial crisis: Political leaders legislating that non-credit worthy individuals be given loans.
Whatever happened to the investigation of Banking Committee Chairman Christopher Dodd for taking a sweetheart "loan" from Countrywide Mortgage? The foxes ruling the henhouse should also be stripped of their ability to amass large personal wealth.

Acountablity is a great topic if our government could only exercise what they preach. The president does not get paid more or less for his performance. If that were the case, then Bush would owe this country millions. These Wall Street companies are still making money but sometimes they make less than what they are spending and we have today's problem. So now we become socialistic in controlling how a company should use the money they make for paying their executives. The public needs to stand up and admit that they screwed up to. Nobody held a gun to anyone's head when the public took a subprime mortgage. The public was plain ignorant when it came to financial risk over borrowing money. And when it doesn't work out? Blame wall street because assuming part blame is too much of a reality for people to admit.

I agree totally with Steven Levy's comment that "being a corporate exec is both a privilege and a responsibility." I think it is utterly absurd that the execs of a company with negative earnings should be rewarded with obscene bonus and compensation. Do they think we are all idiots?

It is unacceptable that ANY CEO be provided and/or accept a bonus if the company does not perform. That tells me that the compensation part of the Board of Directors have not written a good bonus program. Below the CEO, other executives should be eligible for bonuses partly based upon the performance of their responsibility area AND the corporate performance. If the company does not perform, then these lower executives are also impacted in their bonus amounts. I also agree with Steven Levy that the top executives should be incented on longer term goals that are larger parts of their bonuses vs. the short term quarter-to-quarter focus.
The bonuses given out by Merrill Lynch were totally unacceptable whether they were receiving TARP funds or not. Further, to have B of A agree with these bonuses just does not stand the test of reason.

Using ARod as an example of paying someone an obscene amount of money for nothing is interesting. ARod never won a world series single handley, nor will he ever. In fact, the Yankees don't win every year despite having the highest compensation total in Major League Baseball. CEO's are in the same game. Show me one CEO who single handedly made a major company successful. There is not one, not one. Not Jack Welch, not anyone. I acknowledge that there are very smart people in global business, but teams get things done. Teams of committed, capable people.

The notion that they deserve (for the lack of results) the kind of compensation they are getting is absurd, yet is oddly consistent with the new spending bill Congress just passed.

Having said that, BODs are more to blame and should be held to account for mismanaging the remuneration for executives in companies.

I am an executive for a large middle market company. Since we are an ESOP all of our salaried employees are the owners, but we have independents on our BOD. We have a bonus plan covering essentially all non-bargaining employees and a super bonus plan covering only the executive management group. The latter plan under the guise of performance does perform extremely well when the company peaks during its economic cycles. For those of us in this group we are able to cash out at the peak with huge sums. It is unfortunate for our other shareholders that they must see their retirement nest egg dwindle as the cycle heads downwards. We are confident though that the economic cycle will one day head upwards and restore their lost retirement fund. But when it peaks again we in the executive management group will be able to cash out again. Now isn't that fair!

Those stinkers should not get a dime in bonuses for "profits" gained by laying off US workers. The workers did not drive the ship onto the rocks. As a Sony head once said, "It was managment's risk." Layoffs are symptoms of managment failure.

The article is cited is just one more indication of a mindset that avoids the reality. Public money had to be pumped into these companies because of bad executive decisions and HAD to be done to avoid a failure of the global banking system. To argue that high pay is still justified in such circumstances is absurd.

I do not see any justification for compensation at a million dollars yet along $500,000. Out of touch, you bet! We can't pay a living minimum wage, but we can compensate someone at thousand's of dollars. We are forcing people who were making a living wage to get use to substantially less income, because of moving jobs oversees. One of the conditions for aiding the auto companies is that the workers pay be more in line with foriegn wages. I for one think there is gross unfairness in the process and that the process needs to be more sensible. I'm for downsizing executive pay in the same manner as we are downsizing worker's pay. Stockholders should agree, because the profits are going to pay the exorbitant wages. The compensation process that supports the current system is ABUSIVE and needs to be rethought!

Compensation for executive, sports figures, Hollywood, etc. has become obscene. The name of the game is how much money can I get. The reality is that no one is worth the type of salaries being paid and all of the "little people" end up paying for this with higher product and ticket prices.

As far as corporate America is concerned, I have lived in that world for over 30 years at fairly senior levels and I can tell you most organizations survive in spite of, not because of, the top level of management. In most cases this group is out of touch with what is actually happening in their organization. They usually have one focus; the next quarter's EPS numbers. Somewhere along the way, there has been this mindset that has developed that profits can defy gravity...they always go up 8-12% regardless of conditions. When the economy is growing 3-4% (used to) and your profits need to grow 8-12% to keep the 26 year old MBA analysts on Wall Street happy, it causes you to do stupid things; take more risk, under-invest in those things you need to grow, reduce quality and customer service...all counterproductive to actually growing those earnings.

For some reason there is this feeling voiced that next year will be “better” and we can make the investments we need to make and reduce our risk profile. I have yet to see a better next year when the annual plan had the flexibility to improve these things. If in fact conditions were a little better next year that merely presented an opportunity to raise the EPS target to 15% from 12% not fix past sins you had created to make last year’s earnings.

Most executives never meet their customers or rarely see their employees. They can only communicate in "corporate speak," which like "political speak" lacks significant clarity and honesty. They have the next management layer down that does its best to provide an insulation layer between the worker bees and the executive layer. Senior management fears too much exposure both ways. They don't want the worker bees to see how out of touch the executives are and they want the executives to continue to live in their fantasy land. I have spent a career managing this delicate balance so that we could actually get work done.

Trust me, none of the top bank execs truly understood the layers of risks that were being created within their organizations. These guys aren't quants and unless you understand the models, you don't understand the risks (even the quants didn't understand it in many cases). They also don’t understand that risk is exponential and not linear. Today’s world is a classic example of this. These guys are not technologist either, yet their world is greatly dependent on technology. I have seen execs make some of the stupidest comments about technology, in a very authoritative tone of course, that clearly indicated they had no idea what they were talking about. In many cases these guys have plod down the same old, and I'll use this word very loosely, strategic path for years based on their paradigms. They really don't understand strategic planning and they certainly are not prepared to deal with an environmental scan that tells them that the world is different than they see it. Most of these folks could use a serious charisma transplant as they are stiff cardboard cutouts of what an executive should be (in their minds). Few have the personalities that could rally the troops. These folks have all these deficiencies, yet they expect millions for their "leadership" because they create a mirage that produces next quarter's EPS…amazing. They old say “empty suits” pretty much covers it.

As far as salary caps go, I think you would have a line of qualified applicants a mile long willing to accept a measly $500,000 to do these jobs and even fly commercial to get there. There seems to be this great fear there is a shortage of people that can run an organization. There must be some kind of executive PR group somewhere that promotes this concept for public consumption. There are at least 50 people in my organization alone that could easily do the CEO’s job…some much better. A shortage of talent to do this job is not a limitation.

Finally corporate Boards have clearly failed to protect the shareholders they were elected to serve. In many cases the Board members have egos even bigger than the executives and become too "chummy" with the execs to properly regulate their activities. In most cases the Board members come to the Board meetings, collect their fee and socialize. Very few tough issues get to the Board as the execs see to that…until things blow up and damage control is no longer possible.