By: Karen DillonHarvard Business Review

September 2009

GE CEO refused performance-based bonusThe forfeit of this pay is not what bothers the

CEO, but shareholders determining payIf Shareholders get a say in pay, what else

will they want a say inWorking conditions?Carbon footprint?

Where did things go wrongOutrage is not newEconomic crisis makes outrage strongerCEO should not make more than 20% of

average salary, but they earn up to 300%Companies find loopholes on the taxes in the

bonusesList goes on and on…a lot to fuel the fire

British ModelShareholders have opinion but not bindingUntil 2009 there were not a lot of active

shareholders when it came to pay topicsTrue power lies within the independent

advisory firms that make recommendations to shareholdersSHELL shareholders voted against a 1.9million

dollar bonus for CEO because of recommendation

What’s The Answer?Era of stock options and preset bonuses is over,

but no one agrees on what should come nextOnly a few top executives have taken pay cuts or

declined bonusesIn general, business leaders have been reluctant

to participate in the discussion and have tried to keep their heads low

These companies need to take a stand and decide what is at stake and what they need to do about it

Is Any Company Already on Track?One company has linked performance-based

compensation for executives to economic value added

No one receives a bonus based on individual performance

Separate long-term incentive program granting shares and options on basis of position and individual performance

The Long ViewThere are hopes that this issue will blow over

when the economy turns aroundCompensation is a small portion of what

should be worried about in the scheme of things

Need to worry more about the people below top level and keeping them motivated