Not a week goes by without yet another story which describes how executive managers have abused their compensation, most notably income generated via target-dependent bonuses. Ranging from investment bankers to insurance brokers, the public opinion has generally converged on the fact that the remuneration of top employees requires redesign.
As their pay-off is contingent upon the achievement of mostly short-term goals, many current bonus structures set the wrong incentives for guiding executives' behaviour. A particular noteworthy example concerns executives at Fannie Mae, who manipulated their accounting records for years to gain higher bonuses, with little regard for the future. More recently, Stephen Elop's €18.8 million pay-off in the Microsoft/Nokia takeover and his role in the merger is under increasing scrutiny, with no definite outcome for the foreseeable future.
Due to increasing financial volatility and growing worries regarding the behaviour of top managers, shareholders and stakeholders (worldwide) hold a vested interest in redesigning the executive pay structure, which should ideally be aimed towards aligning the executive's behaviour with the interest of both parties.