Questions are being raised about whether pay for performance at its core is fatally flawed or at least misused
Pay for performance sounds right. It aligns managers and investors. It has been the gold standard for compensation at least since proponents of agency theory 25 years ago began advocating the use of stock options in compensation packages. Its use is a source of praise in the evaluation of governance by rating agencies that provide guidance to shareholders in proxy voting.
This article was provided with permission from Harvard Business School Working Knowledge.