Ceo Pay Should Obey One Master: The Shareholder
I found it interesting that in your recent article "CEO Pay: Ready for takeoff" (Special Report, Apr. 24), you offer two yardsticks for measuring executive pay: One relates pay to how good a job the boss did for shareholders, the other to how well the boss did for the company.
Many in the finance industry would argue that the only meaningful way to judge company performance is based on the returns to shareholders, and it is in fact dangerous to judge the performance of companies based on traditional accounting measures such as return on equity. The reason is that accounting measures fail to consistently indicate the actual health and value of companies.
At the end of the day, I am investing in management's ability to generate an appropriate return on my investment, which can only be measured according to the shareholder returns I receive. It is only appropriate, therefore, that the executives should be paid according to how well they perform for me and the other owners of the company.
Wanchai, Hong Kong