On the surface, it seems to make sense that tying corporate officer extra compensation pay with the increase in the share price of a given corporation, has got to be a win-win situation; in the sense that the corporate officers that are successful in accomplishing such, thus get more compensation, while the shareholders get the benefit of an increasing share price, as well; and possibly also, a higher dividend payment. As good as this might be, there are several factors not taken into prudent consideration, of which, the most important one, is that the compensation package so being provided to all the other non-executive employees, along with their other benefits, has over the last few decades, seen that the gap between their pay against executive pay, which was already pretty outrageous, even back in the 1980s, that the ratio of the pay of those in the executive office compared to regular employees, has gotten ever increasingly greater over recent decades. Additionally, whenever a substantial amount of the profits so made at a company are thus utilized to buy back its own shares, this means that the monies so earned, have not thus been earmarked for expansion, or for research and development, or for an increase in pay for regular employees, or basically for anything else that would be of benefit for those that are employed there, but rather the main purpose in buying back one’s own stock, is to help “jack” the price of that respective stock, higher. Also, to believe that the overriding reason why corporations are able to make good profits, somehow comes down to almost exclusively those in the executive offices, is virtually never true, especially for those corporations that employ thousands of people and have offices all over the world.
There is though, another valid reason, for why the executive office, should not have their additional compensation tied so lucratively to the stock price, which has an awful lot to do with the fact that highly intelligent and clever people, that are motivated by money, above all, are going to be susceptible to doing the types of things that will get them that money, whether or not, this is good for the corporation, at large, for the long term, or not. In other words, any incentive which is structured in a way in which the lure of that incentive is so high, is going to lend itself to being “gamed,” by those that don’t care for much of anything other than how that they can get their hands on that money, and if that thus means bending the rules, or breaking the rules, than such will probably be done.
To believe that all those in the executive office who already have the prestige, the power, the money, and the best of benefits, have to have even more money as an incentive to do an even better job, are short-sighted in that sort of thinking; and are inconsiderate, of that fact, that the very best well-run corporations, first make sure to fairly take care of all of those that are its employees as not only the right thing to do, but the most sensible thing to do, as well.