Executive Compensation Re: Executive Compensation Thesis

This talent does need to be retained.

With respect to the executives who were involved in mortgage-backed securities, however, this argument holds little water. These are not talented individuals, as demonstrated by the substantial losses their actions have inflicted upon the company. They are not the sort of employees that the firm should be seeking to retain. It is only due to the outdated or erroneous perception that these individuals cannot be replaced that they are still valued at all.

Eventually, shareholders will acquire more direct control over executive compensation. Until that time, however, the distortions in the market will still exist, as long as the perception of scarcity of talent persists. As more shareholders re-align executive compensation with long-term results, this perception will diminish. Until then, executives will be paid more than they are worth, putting shareholder value at risk.

Works Cited

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