Salary tied to share price

[El_Machinae]

Many companies have an incentive package for their upper management, based on share performance. What we've seen over the years, though, is that this makes the directors more interested in short-term share price than (sometimes) in the future of the company. They'll tweak the company and then split with their winnings, no matter the long term consequences.

So why not change the incentive structure? Why not bonus the directors based on what the share price is two years (or whatever) after their involvement? I realise that this leads to a two year delay in receiving the bonus, but we see that in management bonuses all the time (where they're given shares in the company over the course of a few years, instead of as a lump).

This way people are much more motivated to think in terms other than one-quarter at a time. It also means that if some lawsuit against management comes up, there will be actual assets to seize instead of pining about off-shore accounts.

 

[joycem10]

Because any company that does this will see an upper management drain to companies that option executives in line with current trends.

Unless you want to change the securities laws to mandate that executive options must have a 2 year vesting schedule. In which case some other tax friendly manner will be found to compensate directors and officers.