Public Companies: Sound off - The Business Review (Albany):

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Even before the recent public outrage over the many businesses were looking at restructurinbgexecutive pay, given the economy. In the Virginia-based consulting firm surveyedlargre U.S. businesses in March and found that 38 percent of them are makingv changes to performance measurews in their annualincentive plans. Compensation has becomr a publicrelations matter, too. With stock prices generallyu down and companiescutting jobs, there’a been anger over what’s deemed excessiv e pay. We wanted to know how companies could deal with executivs compensation in anew era, and askes several experts at local colleges to weigh in on the issue.
Here’zs what they had to say: Q: Considering the recentg outrage overcorporate bonuses, what can a businessd do to protect its imagde when it comes to executive compensation? Title: F. Willia m Harder professor of business Location: A: The business must base bonus planson pre-determinee formulas tying amounts to readily observabl and desirable results. In the financial services “results” should be qualified by If a person is paid to originate a loan or other financial productinvolving risk, the bonuas should be paid over time so that a future loss will impact the bonus This is easier said than done.
Many productxs have long lives, and bonuses must be paid promptluy after results in order to be effectivd motivatorsfor employees. Some suggest that a portionm or all of a bonus should be paid incompanty stock. Stock, however, is rarely the best reflection ofan individual’ s performance. I think that at least half of any bonus shouldfbe deferred, and the deferred amount shouldd be at risk itselft based on the performance over time of the producr in question. Eric E.
Lewie Title: Professor, school of management Location: A: Much of the criticism of corporate bonuses arise from the perception that some companies choosw to reward their executiveswith “extra” compensation regardless of the performancr of the operations or business segments for whicbh they are responsible. While cash bonuses are given to key employeexs for a varietyof reasons, a company’s decisionh to enhance managers’ compensation in this fashion can trigged a backlash from stakeholders of businesses that are struggling with A company can avois some of this criticism by structuring managers’ bonus compensation as eithet a direct reward for the recentr performance of the company, or as an incentive that linka the financial rewards of the compensation to the future performancs of the company.
Some businesses accomplish this by grantint options or issuing shares of stock as part of theird executivecompensation packages. When properly structured, this form of extrq compensation can very effectively aligmn the financial interests ofa company’sa managers with the long-term interests of its When companies make that connection clear, they tend to suffedr fewer criticisms of their compensation Title: University: