Pay for Performance in the Corporate World
For those who believe that corporate employees rise and fall based on the fates of their companies, here's a story ripped from the headlines: Washington Mutual is shielding executive performance pay from the housing crisis fallout. From the Wall Street Journal article:
In the filing, the human-resources committee of WaMu's board, which approved the compensation targets, cited the "challenging business environment and the need to evaluate performance across a wide range of factors." The committee said it will "exercise its discretion" to determine the exact amount of the cash bonuses for executives covered by the plan and "subjectively evaluate company performance in credit risk management and other strategic actions."...WaMu directors wanted to develop a plan that would not penalize executives for market conditions beyond their control but would also allow discretion to judge individual performance, according to a person familiar with the board's thinking.
By extension, should NYC teachers participating in the bonus program get a break because of "market conditions beyond their control," i.e. budget cuts?
Another CEO sums up corporate performance pay nicely:
John Buckingham, CEO of Al Frank Asset Management Inc. in Laguna Beach, Calif., which holds about 119,000 shares of WaMu according to FactSet Research Systems Inc., said the board was being realistic by trying to show that it still is possible for executives to earn a bonus. "You have to do things to keep them," he said. "It might not be politically correct, because the captain's supposed to go down with the ship. But in the real world, that's not how it works."
For more on compensation and accountability in other sectors, check out Richard Rothstein's new paper, "Holding Accountability to Account: How Scholarship and Experience in Other Fields Inform Exploration of Performance Incentives in Education."