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My Say on Executive Pay
by Frank Monahan
The notion that executives get paid gobs and gobs of money so they can
fly anywhere they want on their corporate jets has become wildly popular
these days. As an experienced executive compensation guy I know this
perspective is flawed and lacks technical precision. We compensation
professionals know that true executive pay is about someone who makes
gobs and gobs of money but prefers not to receive some or all of those
gobs right now. Furthermore, we know that they can no longer fly
anywhere they want on their corporate jets. Flying anywhere near the D.C.
area is strictly prohibited and could result in further compensation caps.
We know executives are under attack.
This may seem quite understandable. Presumably these executives
have enough cash to meet their needs relative to the bottom four rungs of
Maslowe’s hierarchy and they should now be focused on the self-
actualization phase. That and they prefer to not be taxed on those gobs
and gobs right now. And maybe, just maybe, their accountants can figure
out how to defer those taxes forever, interest included.
But self-actualization it is. And one of the most popular ways to get self-
actualized is to make more than those ahead of you on the Fortune 500
list. It’s not about the gobs and gobs, really. The gobs are more like
points in a game. And the game is not won until you have more than the
other guy. But let’s face it, this is not just about the executives at the top.
It doesn’t matter what level you are in the organization, you want to make
more gobs than the other guy. After all, you deserve it.
So everyone wants more gobs than they actually get. The only difference
is that executives don’t need to get theirs right now. They can afford to
defer it. This is quite unlike some politicians in Washington who don’t
defer the gobs they receive. These guys take another tact. They just don't
pay taxes on the gobs unless they get nominated for some top spot in the
administration. This is similar to deferring like the executives with the
only difference being it is technically quite illegal. Not to worry, however.
Apparently, people hate politicians less than they do executives and
forgiveness is just one dramatic mea culpa performance away.
So it is the executives, not the politicians who are under attack.
Politicians can take the offensive and act outraged and add
enhancements to section 409a. (Section 409a is part of the IRS code
and it details how politicians can make deferring more and more difficult
while at the same time it is an integral part of the stimulus package for
out-of-work attorneys.) This sense of outrage at the sheer amount of
gobs does not apply to their celebrity friends in Hollywood, sports or rock
stardom. For now, those celebrities can make and spend all the gobs
they want. In fact, they are free to take advantage of all those corporate
jets that are now available at discount rates. After all, these are the
people who can pretend to be someone else in front of a camera, or who
can sing and dance (O.K. so maybe they all can’t sing but they can at
least pretend to sing and dance or pretend to dance and sing) or they can
hit a little round ball better than some other guys can hit a little round ball.
Politicians do not have a problem with these kinds of people who make
gobs and gobs, particularly if some of those gobs can find its way into
their campaign coffers.
What is an experienced compensation professional to do? It seems to
me that the one characteristic of a good comp guy is an ability to remain
tenaciously objective. And that objectivity is critical when it comes to
providing perspective on the use of gobs for compensation purposes in
general and executive compensation in particular. After all, a good comp
guy understands that for an economy to grow companies will need to use
their gobs and gobs of money wisely, very wisely. Otherwise the gobs
and gobs are going to fall into the wrong hands. Or just disappear
entirely.
© Frank Monahan 2009
by Frank Monahan
The notion that executives get paid gobs and gobs of money so they can
fly anywhere they want on their corporate jets has become wildly popular
these days. As an experienced executive compensation guy I know this
perspective is flawed and lacks technical precision. We compensation
professionals know that true executive pay is about someone who makes
gobs and gobs of money but prefers not to receive some or all of those
gobs right now. Furthermore, we know that they can no longer fly
anywhere they want on their corporate jets. Flying anywhere near the D.C.
area is strictly prohibited and could result in further compensation caps.
We know executives are under attack.
This may seem quite understandable. Presumably these executives
have enough cash to meet their needs relative to the bottom four rungs of
Maslowe’s hierarchy and they should now be focused on the self-
actualization phase. That and they prefer to not be taxed on those gobs
and gobs right now. And maybe, just maybe, their accountants can figure
out how to defer those taxes forever, interest included.
But self-actualization it is. And one of the most popular ways to get self-
actualized is to make more than those ahead of you on the Fortune 500
list. It’s not about the gobs and gobs, really. The gobs are more like
points in a game. And the game is not won until you have more than the
other guy. But let’s face it, this is not just about the executives at the top.
It doesn’t matter what level you are in the organization, you want to make
more gobs than the other guy. After all, you deserve it.
So everyone wants more gobs than they actually get. The only difference
is that executives don’t need to get theirs right now. They can afford to
defer it. This is quite unlike some politicians in Washington who don’t
defer the gobs they receive. These guys take another tact. They just don't
pay taxes on the gobs unless they get nominated for some top spot in the
administration. This is similar to deferring like the executives with the
only difference being it is technically quite illegal. Not to worry, however.
Apparently, people hate politicians less than they do executives and
forgiveness is just one dramatic mea culpa performance away.
So it is the executives, not the politicians who are under attack.
Politicians can take the offensive and act outraged and add
enhancements to section 409a. (Section 409a is part of the IRS code
and it details how politicians can make deferring more and more difficult
while at the same time it is an integral part of the stimulus package for
out-of-work attorneys.) This sense of outrage at the sheer amount of
gobs does not apply to their celebrity friends in Hollywood, sports or rock
stardom. For now, those celebrities can make and spend all the gobs
they want. In fact, they are free to take advantage of all those corporate
jets that are now available at discount rates. After all, these are the
people who can pretend to be someone else in front of a camera, or who
can sing and dance (O.K. so maybe they all can’t sing but they can at
least pretend to sing and dance or pretend to dance and sing) or they can
hit a little round ball better than some other guys can hit a little round ball.
Politicians do not have a problem with these kinds of people who make
gobs and gobs, particularly if some of those gobs can find its way into
their campaign coffers.
What is an experienced compensation professional to do? It seems to
me that the one characteristic of a good comp guy is an ability to remain
tenaciously objective. And that objectivity is critical when it comes to
providing perspective on the use of gobs for compensation purposes in
general and executive compensation in particular. After all, a good comp
guy understands that for an economy to grow companies will need to use
their gobs and gobs of money wisely, very wisely. Otherwise the gobs
and gobs are going to fall into the wrong hands. Or just disappear
entirely.
© Frank Monahan 2009