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Inteligência Competitiva
Alfredo Passos
No More Executive Bonuses!
Posted on 30 de November de 2009
The problem isn’t that they are poorly designed. The problem is that they exist.
By Henry Mintzberg
These days, it seems, there is no shortage of recommendations for fixing the way bonuses are
paid to executives at big public companies.
Well, I have my own recommendation: Scrap the whole thing. Don’t pay any bonuses. Nothing.
This may sound extreme. But when you look at the way the compensation game is played—and
the assumptions that are made by those who want to reform it—you can come to no other
conclusion. The system simply can’t be fixed. Executive bonuses—especially in the form of
stock and option grants—represent the most prominent form of legal corruption that has been
undermining our large corporations and bringing down the global economy. Get rid of them and
we will all be better off for it.
The failings of the current system—and the executives who live by it—are painfully obvious.
Although these executives like to think of themselves as leaders, when it comes to their pay
practices, many of them haven’t been demonstrating leadership at all. Instead they’ve been
acting like gamblers—except that the games they play are hopelessly rigged in their favor.
First, they play with other people’s money—the stockholders’, not to mention the livelihoods of
their employees and the sustainability of their institutions.
Second, they collect not when they win so much as when it appears that they are winning
—because their company’s stock price has gone up and their bonuses have kicked in. In such a
game, you make sure to have your best cards on the table, while you keep the rest hidden in
your hand.
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No More Executive Bonuses! | Inteligência Competitiva
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Third, they also collect when they lose—it’s called a “golden parachute.” Some gamblers.
Fourth, some even collect just for drawing cards—for example, receiving a special bonus when
they have signed a merger, before anyone can know if it will work out. Most mergers don’t.
And fifth, on top of all this, there are chief executives who collect merely for not leaving the
table. This little trick is called a “retention bonus”—being paid for staying in the game!
Read more here.
Source: Henry Mintzberg. November 30, 2009. MITSloan Management Review. Massachusetts
Institute of Technology.
Dr. Mintzberg is a professor at the Desautels Faculty of Management at McGill University in
Montreal.
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