Supplying Demand, or Demanding Supply?

“Last year, directors of fund manager Waddell & Reed Financial Inc. looked at the roughly $70 million Chief Executive Henry Herrmann had collected in stock, pension benefits and deferred compensation over his 36-year career, and deemed it ‘sufficient’ for retirement, according to its proxy statement. The board stopped extra contributions to Mr. Herrmann's retirement fund.

“Waddell & Reed is among a growing number of companies scrutinizing how much they have paid executives over time. Nearly 15% of Fortune 500 firms said they took such ‘accumulated wealth’ into account in setting 2007 executive pay, up from 8.4% in 2006...

“The sums involved can be significant. The median CEO in Equilar's study of 338 large companies held $56.7 million in stock, outstanding stock options and accumulated retirement benefits...

“‘Compensation committees are all wrestling with the question of how much is too much,’ says Miles Meyer, vice president for human resources at Kellogg ...

“‘Intuitively, there's some point at which you'd say, Gee, that seems like enough wealth accumulated for the time being,’ says Mr. Meyer. He says the committee hasn't discussed where that point might be...

“When directors realize how much they have given executives, there are ‘eye-opening, Holy Cow moments,’ says Jesse Brill, a San Francisco lawyer…

“Many CEOs aren't happy with the idea of capping pay. Aflac Inc. Chief Executive Daniel P. Amos, who holds 9.9 million shares valued at about $650 million, says he views equity awards as a way to keep score of his performance and that he would be less motivated if his pay was cut below that of other CEOs.

“But Richard Brooks, chief executive of apparel maker Zumiez Inc., says his 3.7 million shares -- valued at about $72 million -- are adequate incentive. Mr. Brooks hasn't received stock options or equity since 1993, and when other executives accumulate sufficient equity they won't either, he says.

“‘At some point [getting more stock] doesn't change behavior,’ says Mr. Brooks. ‘So how is it going to change performance?’”

(“Firms Measure a CEO's (Net) Worth; In Vetting Pay, Companies Take Stock of Accumulated Wealth; Directors Wrestle With 'Turning Off the Hose'.” Phred Dvorak. Wall Street Journal: June 23, 2008. pg. B.1)

SIGNIFICANT, ENOUGH, TOO MUCH... what do they mean? Where might that point be?

Who is to tell? Is it the board (Are their eyes now open?), or the labor market, or the financial markets?

Do you understand the linkages among outcomes, measurement, actions, objectives, and strategies?

Once we understand linkages, then we can begin to pull the right levers to get the results we need.