A new paper,
"Beyond the Boardroom: Considering CEO Pay in a Broader Context," argues that excessive CEO pay is bad for a company (not surprising), but the authors also give suggestions for aligning pay and performance throughout company ranks:
- As many employees as possible should be part of an organization-wide,
pay-for-performance model; merit increases should allow for
significant differentiation between employee and company performance.
-
The organization's bonus plan generally
should use similar metrics for both employees and the CEO; the funding
percentages should be somewhat alike.
- Stock incentive plans should stem from board-level decisions over who
is eligible, but participation should be limited to top performers.
- Limits should be placed on special awards and perquisites not linked
to performance.