In light of recent events in which the role of government and executive pay has moved to center stage, the parameters of compensation have taken on a whole new twist. But whether publicly traded, privately held, or government-supported, the basis for compensation in all companies should ultimately rest with performance.
Tying compensation to performance is the most basic form of accountability. It seems such an obvious connection, yet I can’t believe how frequently I find that year after year workers who don’t meet their objectives continue to get pay raises. If there are no consequences for poor performance, you can’t expect improvement. What you can expect is a company full of poor performers.