If Shareholders and Executives Explained Executive Pay as a Meal

Recently a lawyer mentioned to me that he had decided to utilize more basic executive plan designs, even when they might not be as good a fit for a specific client. When asked to explain he said that it was too hard to communicate complex plan designs when board members and shareholders demanded something they could understand quickly.

He said the ironic part was that shareholders then complained when executive pay was too high, or ineffective at retention, or paid out large amounts at severance. The disconnect between what was needed and what the shareholders understood was just too big.

Now, of course, this isn’t the case at every company. But with there being so many issues and details to review during proxy season, a simple executive compensation plan is certainly attractive. And, simple approaches are often more than enough to accomplish the goals of many companies. Even when pay is simple, the misunderstanding between shareholders, boards and executives can persist. Perhaps its just a matter of perspective. I would love to know what you think about this issue.