If there was ever someone out there that could help companies determine the best compensation and governance structure for their long-term success, it is Jeremy Goldstein. Goldstein and his firm, Jeremy L. Goldstein & Associates, a boutique firm located in New York, NY, has helped hundreds of companies both big and small determine the best course of action for their compensation, and he has even helped to settle several disputes going on in the sector. Goldstein recently weighed in on one of the most impactful disputes in the compensation arena lately, which is whether performance-based incentive programs are a good thing.
In recent history, performance-based compensation has always been the default program for employee bonuses. If the company does well, the employees get a bonus. However, certain events have brought to light just how much influence top-level executives have on these bonuses and the metrics used to calculate them. Many people, including shareholders, believe that executives should not be able to singlehandedly affect the bonuses of the workers. By doing so, they also make expenses and earnings either fraudulent or uneven, both of which are events that can hurt the company in the long-term. Learn more: https://www.avvo.com/attorneys/10019-ny-jeremy-goldstein-978103.html#client_reviews
Speaking of long-term effects, another reason opponents are arguing against performance-based compensation is that all of the metrics it is based on, whether it be earnings per share, net income, or margins, are looking into the past and have no bearing on the company’s performance in the future. In theory, employees that have helped to grow the shareholder’s value and enabled the company to continue on are the ones that should be rewarded. Anyone can cut expenses for a quarter by simply moving them into another period.
Jeremy Goldstein considered this question and came up with some interesting insights. First of all, he argues that all companies should have a better view on the accountability of the top executives. These executives need to be held accountable for all of their actions, good and bad, and shareholders need to make sure that executives acting against the company’s best interest are removed promptly. Next, incentive programs must be redone to include provisions for forward looking metrics as well as backward-looking ones.
Jeremy Goldstein graduated with his J.D. from New York University. He earned his Master’s from the University of Chicago and his Bachelor’s from Cornell. He has worked several years in the field and has become an expert in all things compensation, even sitting as an advisor on several compensation committees.