{"id":1056,"date":"2009-04-07T19:36:23","date_gmt":"2009-04-08T03:36:23","guid":{"rendered":"http:\/\/hodakvalue.com\/blog\/?p=1056"},"modified":"2009-04-07T19:45:06","modified_gmt":"2009-04-08T03:45:06","slug":"what-would-lloyd-do","status":"publish","type":"post","link":"http:\/\/hodakvalue.com\/blog\/what-would-lloyd-do\/","title":{"rendered":"What would Lloyd do?"},"content":{"rendered":"
\"Pretending

Pretending to be one of the culpable<\/p><\/div>\n

Goldman Sachs CEO shared his idea<\/a> of how executive compensation should look:<\/p>\n

\u2022\u00a0 Compensation should take into account strict adherence to a firm\u2019s management and controls, especially with respect to a person\u2019s judgment and exercising that judgment in terms of risk in all of its forms.\u00a0 That evaluation must be made on a multi-year basis to get a fuller picture of the effect of an individual\u2019s decisions.<\/p>\n

\u2022\u00a0 Individual performance must not be viewed in isolation. Individual compensation should not be set without taking into strong consideration the performance of the business unit and the overall firm. Employees should share in the upside when overall performance is strong and they should all share in the downside when overall performance is weak.<\/p>\n

\u2022\u00a0 No one should get compensated with reference to only his or her own P&L. Compensation should encourage real teamwork and discourage selfish behavior, including excessive risk taking, which hurts the longer term interests of the firm and its shareholders.<\/p><\/blockquote>\n

\u2022\u00a0 Compensation should include an annual salary plus deferred compensation, which is appropriately discretionary because it is based on performance over the entire year.<\/p>\n

\u2022\u00a0 The percentage of compensation awarded in equity should increase significantly as an employee\u2019s total compensation increases.<\/p>\n

\u2022\u00a0 For senior people, most of the compensation should be in deferred equity.\u00a0 Only the firm\u2019s junior people should receive the majority of their compensation in cash.<\/p>\n

\u2022\u00a0 As I mentioned earlier, an individual\u2019s performance should be evaluated over time so as to avoid excessive risk taking and allow for a \u201cclawback\u201d effect.\u00a0 To ensure this, all equity awards should be subject to future delivery and\/or deferred exercise over at least a three-year period.<\/p>\n

\u2022\u00a0 And, senior executive officers should be required to retain the bulk of the equity they receive until they retire.\u00a0 In addition, equity delivery schedules should continue to apply after the individual has left the firm.<\/p><\/blockquote>\n

In other words, it should look a lot like Goldman Sach’s executive compensation plan<\/a>.<\/p>\n

The cynical will say it’s self-serving to basically advocate an incentive plan like the one you already have.\u00a0 But the cynics are wrong.\u00a0 Goldman fared better than almost any other financial firm through this credit crisis.\u00a0 If Lehman, Bear, or AIG were as well run, the world would have a few extra trillion dollars that it doesn’t now have.<\/p>\n

Nevertheless, Goldman was forced to sit in the penalty box with the other Wall Street firms, given “help” they didn’t want or need<\/a>, and not allowed to return<\/a> the funds forced on them.\u00a0 The reason was so the banks that really f*ked up wouldn’t feel so stigmatized.\u00a0 The effect was to stigmatize one of the few firms that didn’t deserve it.<\/p>\n

Lesson:\u00a0 It’s not wealth that government wants to spread around.<\/p>\n","protected":false},"excerpt":{"rendered":"

Goldman Sachs CEO shared his idea of how executive compensation should look: \u2022\u00a0 Compensation should take into account strict adherence to a firm\u2019s management and controls, especially with respect to a person\u2019s judgment and exercising that judgment in terms of risk in all of its forms.\u00a0 That evaluation must be made on a multi-year basis […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5,12],"tags":[],"class_list":["post-1056","post","type-post","status-publish","format-standard","hentry","category-executive-compensation","category-revealed-preference"],"_links":{"self":[{"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/posts\/1056","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/comments?post=1056"}],"version-history":[{"count":5,"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/posts\/1056\/revisions"}],"predecessor-version":[{"id":1058,"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/posts\/1056\/revisions\/1058"}],"wp:attachment":[{"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/media?parent=1056"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/categories?post=1056"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/tags?post=1056"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}