Week 11 Analysis

Compensation and Trust Bill George, a Harvard Business School professor, notes the increasing lack of trust many now have for the executive compensation plans in place in many corporations. He suggests six policies that, if followed by regulators and the compensation committees on corporate boards, would rebuild trust in corporate pay policies:

Provide full transparency for compensation policies and actual practices.

Create policies that reward long-term performance.

Reward executives for their performance, not the company's stock price.

Lengthen the time horizon for bonuses.

Use approaches that include qualitative measures like strategy implementation, research milestones, and leadership development.

Boost fairness between executives and workers.

Required

Which of George's suggestions do you think are critical to rebuilding shareholders' and others' trust in corporate compensation policies? Explain briefly.

Can you think of another suggestion for improving shareholders' trust in corporate executive pay policies and practices? Explain your choice(s) briefly.