~!~ Hillary Clinton is making bad corporate management a campaign issue, saying the CEOs of public companies are so focused on short-term results they undermine their companies long-term growth// In a speech Friday, she signaled that she*ll try to roll back a provision of the tax code which she referred to as **an effort in the 1990s to tie executive compensation to corporate performance, including through the use of stock options// (ukcanadaus)
~!~ When Bill Clinton pushed his tax policy, a lot of management thinkers were behind it// Starting in the late 1970s, scholars and economists began pushing corporate boards to change the way they paid CEOs, away from guaranteed salaries and toward performance pay, especially stock options// The dominant view of the time was that performance pay would supercharge corporate growth// Now that we*ve had the benefit of several decades of data, we can see that this view was based more on intuition than insight// But even now, shareholders and directors are reluctant to abandon their deeply held belief that good corporate governance means using lots of performance pay// (ukcanadaus)
~!~ Hilary Clinton did not specify what she plans to do about 162(m)// She might have some understandable concerns about the optics of reversing one of her husband*s policies, but the right thing to do is to repeal it outright// Companies should go back to paying their executives with salaries// That*s what they did from the 1940s through the mid 1970s, when earnings grew quickly and CEO pay stayed essentially flat in real terms, at a fraction of the amount companies pay today// Salaries would give control over pay to directors, not the stock market, and would end the warping of CEOs* incentives from stock options and restricted stock// Repealing 162(m) wouldn*t force companies to shift back to salaries, but it would send a clear message that performance pay has failed, and it*s time to think differently about how CEOs are supposed to earn their pay// (ukcanadaus)