Getting desired aims in exec compensation

CONVENTIONAL executive compensation models are built on certain universally accepted principles. For example, a large portion of pay should be at risk, leveraged incentives drive executives to perform better; and performance-based long-term incentives (LTI) help retain key talent.

While these pay-for-performance principles are quite robust and defensible to shareholders, we should ask if they have achieved the desired objectives of driving performance and productivity improvements, differentiating reward outcomes among executives, and motivating and retaining key executives.

Are we paying more for less?