Jarhead91
2009-02-12 05:58:12
Risk and reward were divorced when Congress, the SEC, and FASB changed accounting rules and essentially ended the practice of granting stock options. Options were well aligned with corporate goals – if the value of the firm dropped, they were worth nothing – if value increased, management shared in the success.
With stock options off the table, companies had to offer other types of incentives to retain talent. Guaranteed bonus based on more narrow criteria were written into contracts – hence today’s situation of loser firms still paying bonuses.
