Recent events at troubled financial institutions have unearthed some questionable executive compensation practices that were put in place in years past. However, perhaps some common-sense restraint should be applied going forward. One of the basic principles we encourage at CRI is the use of a "circuit breaker" in any performance or deferred compensation plan. Just as a circuit breaker will save the appliances in your home if there�s an electrical short, performance and deferred compensation plans need to be �tripped� when the company that pays them has a �financial short.� We have seen many examples over the past few months of companies being obligated to pay bonuses and perquisites to executives of failed institutions � in some instances, the very same executives who drove that company to financial ruin. A circuit breaker would have stopped those payments and helped preserve valuable corporate assets at a time when they were needed most. Simply put, a bonus or executive perk should not contribute to the demise of a company.
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Financial Institution Circuit Breaker |
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