Home » CEO Briefing Newsletter » 3 Steps to Secure Sensible CEO Compensation

3 Steps to Secure Sensible CEO Compensation

This week, The Wall Street Journal offers its solution for how to compensate America’s top executives at public companies. Since …

This week, The Wall Street Journal offers its solution for how to compensate America’s top executives at public companies. Since executive compensation packages have taken some real (and warranted) heat, the Journal suggests that it’s more important to focus on how CEOs are paid vs. how much CEOs are paid.

Wharton professor Alex Edmans  gives the Journal these three ways to realign pay with performance:

  1. Pay CEOs in Debt: basing pay in debt and stock could discourage risk taking and make sure the CEO’s interests are aligned with its creditors and shareholders
  2. Make CEOs Wait to Cash In: extending the vesting period until after the CEO leaves drives incentive to focus on the long-term success of the company and not short-term gains
  3. Be Flexible/Change to Fit the Times: be open to changing the incentive structure if there are serious economic changes (reduce cash and increase stock to keep CEO incentive alive)

Read: How to Fix Executive Compensation

About Chief Executive

Chief Executive magazine (published since 1977) is the definitive source that CEOs turn to for insight and ideas that help increase their effectiveness and grow their business. Chief Executive Group also produces e-newsletters and online content at chiefexecutive.net and manages Chief Executive Network and other executive peer groups, as well as conferences and roundtables that enable top corporate officers to discuss key subjects and share their experiences within a community of peers. Chief Executive facilitates the annual “CEO of the Year,” a prestigious honor bestowed upon an outstanding corporate leader, nominated and selected by a group of peers, and is known throughout the U.S. and elsewhere for its annual ranking of Best & Worst States for Business. Visit www.chiefexecutive.net for more information.