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Comment by Noseshine | Hacker News Reader

No, that would not work any better. Who is going to be that god-like genius to disentangle cause and effect of an individual person's actions anyway, and now even in the long run? In an environment where no experiments or tests are possible, because the chosen path is the only path we will ever know.

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For an executive, I don't care tracking cause and effect of their individual actions. I care about the aggregate outcome for stakeholders (shareholders, customers, and employees).

Whether 13 weeks of paid parental leave or this healthcare plan vs that one or this change to the telecommuting rules that they advocated for is irrelevant. Did the company succeed and thrive and serve its stakeholders?

One measure that I've seen recently (and like) is "compounded growth rate, over 6-10 years, of the 3 year moving average of stock price" from grant to payout date, subject to minimum thresholds [so you're not just paying for ordinary market growth].

That measure is also imperfect, but it seems less imperfect than others. (Disclosure: the company I work for adopted such a plan last year, so we won't know how it really plays out for at least 5.5 more years. Edit: program summary here: http://ir.cimpress.com/mobile.view?c=188894&v=202&d=3&id=aHR... )

  For an executive, I don't care tracking cause and
  effect of their individual actions.

So you want to pay executives but not based on how THEY actually did as individuals, but on a group basis?

That is a truly innovative bonus system. Excuse the sarcasm, you invited it.

In case you meant something else than me, you replied to my comment that was a reply to one very specific comment, and I obviously assume we are still on that topic. In that context your reply "I don't care how the individual does" is strange at the very least.

EDIT:

Ah I get it, but it does not make any more sense because if you assumed I meant the actions of the executive on a Tuesday at 2 pm in September instead of his whole reign than I don't understand how one can come up with such an interpretation. Reminds me of the topic submitted one or two days ago of that investor person who didn't want to say anything in public any more to not have to have exactly these kinds of ridiculous misinterpretations to deal with.

You cannot say if it was that specific individuals actions specifically that caused success! Not even if the executive is CEO for 30 years. It has been shown again and again that such successful executives, when placed into a different environment suddenly fail. Because it isn't just them, it is the whole environment that caused their success.

>So you want to pay executives but not based on how THEY actually did as individuals, but on a group basis?

>That is a truly innovative bonus system. Excuse the sarcasm, you invited it.

Yes, that is exactly what I want to do. As a customer, shareholder, or employee, I don't care if it was Bill the COO's execution or Jane the CEO's vision and strategy caused the company to succeed; I care the company succeeded.

It is "all for one and one for all".

> In case you meant something else than me, you replied to my comment that was a reply to one very specific comment, and I obviously assume we are still on that topic.

I also assumed that. We adopted a similarly structured program as edblarney contemplated, summarized here: http://ir.cimpress.com/mobile.view?c=188894&v=202&d=3&id=aHR...

Your text was clear that it was "individual person's actions". I did not misread that as "what they had for lunch on a random Tuesday".

I'm sorry that you are frustrated by "exactly these kinds of ridiculous misinterpretations" in this thread. I don't think they are with the person you think though.

One last comment (the edit period closed on my comment above).

I really like the idea of "vest over 4 [-ish] years" but "payout only after a longer period of time has passed" as a way to let people earn the right to the compensation over a reasonable and market competitive period of time, but still keep them properly incentivized to create value over the long-run, not micro-optimize quarterly or annual results.

The problem is that nothing stops people from taking out a loan or other offsetting contract, secured by those future promises.

I think that would be fine. I'm not trying to prevent people from accessing money before the 6 (or 10 or 15) years is up. I'm trying to make sure that the value of the money they access is determined after a long enough period of time has passed to more fairly evaluate their decisions. There will be a cost to borrowing or offsetting their risk and that cost will be determined by arms-length financial arrangements.

My company is too small for anyone to care, but imagine that Apple or Google adopted such a plan. 5 years in, suppose it looks very likely that the Apple PSUs will pay out. I have no problem with an Apple exec borrowing money against their overall earning potential or even borrowing money specifically against the PSU payout.

The payout happens or doesn't based on the smoothed (moving average) judgment of Apple investors' reaction to those decisions and the financial and strategic performance of the company.

(Note that in many companies case, it is prohibited for employees [or a subset of employees] to enter into certain derivative contracts. Most prohibit outright speculation with naked options. Some even prohibit the selling of covered calls. I believe the full paperwork of our plan prohibits pledging these PSUs as collateral for a loan, but that doesn't prevent an underwriter from looking at my overall financial prospects and deciding to lend based on that overall picture.)

The point of long-term incentive schemes is that bonuses can be clawed back.

That's more of an "in theory" than "in practice" - executive bonuses are almost never clawed back, even retention bonuses in the event of an executive leaving the company.

http://www.businessinsider.com/nikesh-arora-keeps-8-million-...

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