Thursday, March 05, 2009

Executive Pay

Under one of the most inflammatory titles I've seen recently on an article, Forbes has a story "Yes--You Deserve a Fat Bonus". If you didn't get a 6 or 7 figure bonus for 2008, it might take you a while to calm down from reading that title. But once you have calmed down the article is worth reading. Buried in it are some good ideas for compensation plans to help move people from short-term thinking to long-term planning. Speaking about UBS the article explains:
For the brass, however, the Swiss bank is an early reformer and has overhauled its executive comp plan in a way that could become an example for the industry. UBS' executives are now subject to a "cash balance plan," an account in which bonuses are deposited annually but from which only a third can be withdrawn each year. If there's a downturn for either the company or a business unit in the following year, UBS will withdraw money from the account. In a bad year executives can lose everything. Morgan Stanley, Swiss Re, and Zurich Financial are working up similar plans.
A side bar to this article contains a arguement from Carl Icahn that laws need to allow shareholders more control over the board and executive compensation.
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