Recession-stricken 2009 has seen widespread public condemnation of perceived pay excesses and their contribution to the current dire economic climate, with outrage at corporate executive pay eclipsed only by the fury surrounding MPs' expenses. Governments around the world are gearing up to impose guidelines to constrain excessive executive remuneration, at once acceding to public demand and aiming to prevent the sort of risk-taking behaviours alleged to have caused the global economic downturn. But is this the correct course of action?
A well-researched and cogently argued piece in The Economist puts forward the rather controversial proposition that executive pay in the US is much more closely linked to performance than is widely held (external website). However, the article acknowledges that the system is by no means perfect. It says that:
Although the pay system is not broken, parts of it are badly in need of repair.
Therefore, according to The Economist:
If politicians respond by issuing ill-conceived rules on pay that strangle the entrepreneurial spirit, the only thing that will end up getting derailed is a global economic recovery.
I'd be very interested to hear readers' views on The Economist's argument. Please feel free to add your comments below.
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Comments (1)
I'm for the case against. Robert Peston puts it better than I could here:
http://www.bbc.co.uk/blogs/thereporters/robertpeston/2009/06/executive_rewards_for_what.html
Posted by John Dodge | June 9, 2009 5:36 PM
Posted on June 9, 2009 17:36