Like many things, compensating CEOs and managers on the success of the stock seemed like a good idea, but it doesn’t take into account performance and luck and is inherently unfair, so it has to go. Unfortunately, it rewards the people who make the rules, so it might take awhile to get rid of it. Or maybe we’re stuck with it until it all falls apart around us. Hard to say. The public good and greed seldom go hand in hand these days.
Great podcast by Dr. Mihir Desai at Harvard Business Review (I don’t agree with him about capital gains tax, but it’s still a good podcast):
The Incentive Bubble, by Mihir Desai, Harvard Business Review, March 2012
Massively paraphrasing Dr. Desai: “People are outraged by the level of CEO compensation, but it’s the form and contracts that determine that compensation that are the real issues.”