kruker wrote:Bucky wrote:kruker, i'm trying to understand your thesis. You want to compensate for below median performance? What's the incentive then? "Oh well, this is good enough. I'm not gonna break my balls for just another couple G's".
Well....you do get more for over median performance. Typically equity grants are given as threshold, target and max payout levels. When a company uses a relative performance metric, the target payout usually is set at the median, so there is an incentive to perform better than average. What I'm concerned with is the scenario where executives see, sometime in the second half of the year, that they aren't going to be at the median and either start taking wild risks or lose the incentive to work.
I think incremental payouts solve this problem. I'd like to argue, if I can find the right studies, that compensation shouldn't just be about equitable pay, as I think is usually the case, but about equitable pay and risk mitigation. This is usually handled through the use of different performance metrics so an executive has other incentives to keep working or not go crazy, but I have seen enough instances where their equity awards are based on a single metric to want to go a little deeper.
Don't equity stakes serve this function?
