Re:On eve of bankruptcy, US firms shower executives with bon...
by harry8 on Friday July 17, 2020 @09:12PM
(#23878016)
Remember the whole rationale for the options in the first place was so management had something at risk.
So they failed, abysmally, and the company is now in chapter 11. And what they had at risk was nothing. The company probably would have had superior managment if it had /no/ bonus scheme. The incentives between owners and managers are not aligned.
More to the point the owners are represented by agents (fund managers who vote etc) who deal with other agents of the owners (company managers) and the whole incentive alignment thing breaks down pretty badly. How to do it better? It's a difficult and complex problem that probably doesn't have an easy 3 sentence internet forum answer.
But here's a very partial observational one:
It's harder to do it worse than paying bonuses for destroying the wealth of the owners.
So they failed, abysmally, and the company is now in chapter 11. And what they had at risk was nothing. The company probably would have had superior managment if it had /no/ bonus scheme. The incentives between owners and managers are not aligned.
More to the point the owners are represented by agents (fund managers who vote etc) who deal with other agents of the owners (company managers) and the whole incentive alignment thing breaks down pretty badly. How to do it better? It's a difficult and complex problem that probably doesn't have an easy 3 sentence internet forum answer.
But here's a very partial observational one:
It's harder to do it worse than paying bonuses for destroying the wealth of the owners.