I follow the field of executive compensation closely because I get paid as an expert witness in the field.
It seems that every three months there is a new disclosure of perverse behavior. I say perverse behavior because it is usually the result of trying to get around a set of reasonable (and sometimes public) rewards for good management.
Today’s Wall Street Journal (subscription required) recounts the story of eight CEO’s who repeatedly took stock options at the lowest point in the stock cycle. That is not possible with luck or chance. It means the CEOs understood the cycles of
their company stock and had the ability to manipulate the stock price.
(We have no idea who spilled the beans, probably a stock broker.)
What this means is that executive compensation should never be based on rewarding performance based on stock market performance. Simple. I never recommend rewarding CEOs based on stock performance. Now I have proof that it is a bad idea.