Bank Bailout Blues
My column at Townhall today. I actually came up with a defense of golden parachutes that I hadn’t realized before:
And so that type of candidate, who realizes he or she might get let go in a few years, is not going to relish a compensation package as CEO where the payout is $20 million a year if things go well, but only $100,000 and a kick in the pants if things go poorly.
Ironically, if the CEO’s incentives were the lopsided arrangement I just discussed, then the CEO would adopt an extremely narrow, short-sighted mentality. Only when corporations offer a more balanced compensation package—where the CEO does well even if the company tanks—will he have the right incentives as a steward of the assets. The Board of Directors never wants the CEO to feel trapped, and that he needs to turn the numbers around on the books in three months or else his pay drops by $19 million.
