Shareholders are also concerned about pay packages that can encourage executives to sacrifice the future for a present-day payout. Mr. Hodgson points to Sprint Nextel as a prime example. In a recent filing to the Securities and Exchange Commission, the company said it had redesigned its compensation plans so that incentive pay for progress toward goals would kick in every quarter.
“If you put a carrot in front of a donkey’s nose, it simply chases that carrot,” Mr. Hodgson said. “Better you add the carrots to the feedbag, but you don’t let the donkey eat any of them until it’s accomplished what’s needed for long-term success.”
Clearly, this is why modern financial markets are so complicated: the intimate knowledge of the care and feeding of donkeys necessary to accurately predict the preferences of a pack of asses. I admit that Mr. Hodgson's advice does work like a charm. Now, before I feed any of my house pets, I sit down and take a quick run through the numbers for that quarter. I like to make sure they're meeting their targets.
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