Based on A.de Kluyer (2009), I note the following discussion agenda on the topic of CEO performance evaluation and compensation in Corporate Governance:
- On CEO performance evaluation and its main challenges
- Uncertainty on roles and responsibilities
- Lack of time
- Lack of agreement on assessment criteria
- Lack of information on nonquantitative performance
- On dimensions of performance evaluation
- Bottom line impact
- Operational impact
- Leadership effectiveness
- Executive compensation
- How much?
- Stock options?
- Golden parachutes?
- Some observations on CEO incentives (re: Jensen and Murphy (2005)):
- Annual changes in executive compensation do not reflect changes in corporate performance
- Compensation for CEOs is no more variable than compensation for hourly and salaried employees
- With respect to pay for performance, CEO compensation is getting worse rather than better
- Some advices on CEO incentives (re: Jensen and Murphy (2005)):
- CEOs should own substantial amounts of company stock
- Cash compensation should be structured to provide high rewards for outstanding peformance and vice versa
- Make real the threat of dismissal
- On compensation committee
- On executive compensation best practices
References
- A.de. Kluyer, C. (2009) A Primer on Corporate Governance, Business Expert Press. [Chapter 8: CEO performance evaluation and executive compensation]
- Jensen, M.C. and Murphy, K.J. (2005) "CEO incentives - it's not how much you pay, but how", in Chew, Jr., D.H. and Gillan, S.L. (editors) Corporate Governance at the crossroads: a book of readings, McGraw-Hill.
- On executive pay: http://en.wikipedia.org/wiki/Executive_pay
- A guide on CEO compensation: http://www.investopedia.com/articles/stocks/04/111704.asp#axzz1qyYU0Zkz
- On effective CEO performance evaluation: http://www.axi.ca/tca/may2004/featurearticle.shtml
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