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It’s Back to Square One: Pay CEOs with Short-term Incentives? We Say NO!

Today we feature a blog post by Cydney Posner “highlighting a call for companies to reconsider their growing reliance on long-term incentive pay in executive compensation programs.” This article is definitely interesting; however, when does “efficient currency”, in this case short term incentive over long term incentive, come at the expense of planting almond trees that may not pay off for a long time?

A perfect example is Charif’s payout while at Cheniere Energy. They wanted to pay Charif hundreds of millions to hit milestone markers way before the LNG facility is functional and making money, and we were quoted in the Houston Chronicle as saying we would never design it that way. And it turned out we were right! The result: the CEO left and started up a competitor with the money the company paid out. “It brings the whole conversation full circle, and it busts this theory posed that CEO pay should be shoved all into short term incentives. Many things a company is working on takes lots of time to bring to market successfully and you shouldn’t pay the execs because it ‘looks like’ they are successful.” (Chris Crawford, President of Longnecker & Associates)

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