"Clawbacks" Might Bring CEOs Back to Earth

Last Updated Sep 25, 2008 2:18 PM EDT

down_to_earth.JPGThe impetus continues to grow for more scrutiny of outsized executive compensation.
As BNET's financial services blogger Robert Reed reports, the $700 billion bailout is likely to include some kind of pay limits, such as a cap on the CEO salaries of those firms benefitting from the bailout. Details aren't known yet, but the news Thursday afternoon is that Congress has agreed to a plan in principle.

Reed notes that a number of top execs involved in the meltdown already are receiving rather large remuneration, including Richard Fuld of Lehman Brothers, Angelo Mozilo of Countrywide Financial, and Stanley O'Neal of Merrill Lynch.
"Say on Pay" is certain to get more voice in coming months.

One aspect I find intriguing is the possibility of so-called clawback provisions. These would force executives to give back part of their compensation if they don't meet goals or otherwise screw up badly.

"Clawbacks" would do much to change the psychology of executive compensation. The current assumption seems to be that you are certain to get what you or your head hunter managed to negotiate. The new provisions would really put CEOs in jeopardy and might light a fire under more than a few.

It might help bring things down to earth, besides demystify and humanize C-Suites.

(Image by lintmachine via Flickr, CC 2.0)