August 23, 2019

Korn Ferry Institute – Should CEO ‘Mojo’ Decide Pay?

By Irv Becker

This would seem to be a simple thing for directors to know—whether their company is performing well. Profitable? Check. Stock rising? Check. Beating competitors on both? Check and check. Except this is 2019, and now even the standard measures for corporate performance—and how boards should reward CEOs for it—have hit a snag.

In a little-noticed but potentially game-changing move, the United States’ largest corporate-governance outfit is recommending that its institutional shareholders’ clients use a new metric to determine their company’s—and CEO’s—performance. In the new order, companies and CEOs with numbers suggesting that they’re building up momentum for a strong future would be considered rising stars worthy of investor fuel and high salaries. But CEOs with great numbers might also see their big paydays fall, if the metrics suggest a “falling star” scenario.

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