Compensation is something extremely difficult for all companies to figure out. Of course, you want to attract top talent, but you also want to make sure their wage is advantageous for you. You could pay them top dollar and attract a lot of good talent, but then you will have fewer dollars to spend on growing the company. You could also pay less and have money for investment, but then you will not have the people on the payroll that allow you to grow and thrive. Finding that middle ground is difficult, and determining how to deal with incentive payments is even more difficult.
Many companies have decided to go with a performance-based-pay program. This means that, based on how well the company performs in any given year, the employees will receive a bonus that is commensurate with that performance. If the company posted a net loss, there will probably not be any bonus payments. If the company posts a large amount of net income, then the incentive payments to employees will likely be higher. However, there have been several opponents of this incentive pay program coming out of the woodwork in recent years.
The main arguments that these opponents cite are the ability of Executives to change metrics in order to affect pay, as well as the fact that these incentive payments are short-term based and give no credence to the possible future performance of the company. Executives have a lot of control over earnings-per-share, or EPS, one of the metrics commonly used in performance pay programs. They are able to release more shares or buy back shares to alter this metric. They are able to approve large capital projects or keep new projects from sprouting up in certain years to affect expenses. Also, these pay programs do not consider the future performance of the company at all, making incentive payments premature if the company is about to go under the next year.
Jeremy Goldstein, a well-known lawyer and partner of Jeremy L. Goldstein & Associates, LLC, suggested to companies that they take a middle ground. Executives need to be held accountable for their actions, and shareholders also need to know this information. Also, there need to be offsetting goals focused on future projections and performance as well. This way, everyone wins.
Jeremy Goldstein has been a Partner at his own firm for several years, and before that he was a Partner at Wachtell, Lipton, Rosen & Katz. His firm focuses heavily on compensation disputes and corporate governance. Jeremy Goldstein studied at New York University, where he obtained his J.D. from the School of Law. He has worked on several successful cases and has mediated several compensation disputes in his time as a lawyer, and he will continue to grow his success and make compensation something that every company will finally get right.
Visit http://officialjeremygoldstein.com/ to learn more.