Crown Rot?

Should execs pay when they get it wrong?

Boeing, now Volkswagen. Is Intel next? There are others.  Kodak is an antecedent that dropped the ball, for example. Add the 2008 home-loan fiasco that brought many banks to their knees. Maybe what they all have in common is that executives get complacent until the facts hit them like a pie in the face. On the positive side, Microsoft has made a successful shift from hardware to software.

The facts are never quite the same.  Boeing  seemed to be sacrificing safety to production and cost. Volkswagen has failed to effectively adapt to the subsidized EV competition from China. Both are facing flagging profits compounded by worker demands which can’t be easily met.

Who if anyone is to blame? The reality is, there is no crystal ball and even the most perspicacious will not get it right all the time. But if the errors are existential, it seems reasonable to look to the executive suite for answers.

No doubt dissection of the sequence of failure of judgement in each case would be the subject of a professional article or dissertation. It goes without saying that CEO compensation is high and often as not unrelated to performance. It seems to me that there is one palliative that, if not a cure, would certainly be remedial. Make the executives pay for their errors in judgement. Set up compensation, salary and performance related bonuses, that is more than annual in cycle. Hold some vested compensation in escrow for a few years and have a periodic true-up related to performance metrics.

Maye its presumptuous but I would like to think that flagship corporations should suffer less from institutional senescence.