Wretched Article in the Wall Street Journal Today

In today's WSJ, Henry Mintzberg, a professor at a university, wrote a piece about how we should do away with all executive bonuses.  The article made a weak effort to be fact driven and scenario driven, but ended up being illogical, unsound and wrong!  I was most disturbed at how this piece, supposedly written by a scholar of business, failed to identify and address the real issues at stake.  It was as if the free market had never existed, and rather that bonuses paid to date have simply been the result of some "we must pay big bonuses" government policy.

First, the reason we (the shareholders) pay performance bonuses is we believe we need to attract the best people.  For a person to argue to do away with these bonuses and to NOT address the ability of companies to still be able to attract people means that this piece is not credible.  I am disappointed the editors at the Journal did not insist this be addressed prior to publishing.  I might as well argue for NASA to launch a space program to put  a man in another galaxy without addressing whether such a mission is physically possible!   The implicit assumption by Mintzberg is that these bonuses are completely optional and not needed to attract and retain these people.  Really?  Defend that position.  I do not want to indict all of academia, but this flawed "out of market" logic is what I read all too often from those who are not in the market, insulated from the market, and who live in a world of "tenure" supported by unseen, unknown and unappreciated donors.  I think the donors do more harm than good.

Second, on the dynamics Mintzberg cites regarding CEO leadership, culture building, and stock price being the best indicator of a company's health...false, false and false again.  I sit on many boards, and this is not the case.  A CEO sets the culture for an entire company.  Implicitly or explicitly, every organization has a value system and the CEO either actively manages those values or chooses not to address them and they develop on their own -- either way a company's culture is the responsibility of the CEO.  While stock price is not perfect, it is tied closest to shareholder value, and no better way has been shown to date (one suggestion, -- lengthen the measurement period to several years to better align with shareholder interests.)

Finally, the entire issue of executive bonuses is a straw man around an emotional issue to many, meant to deflect attention from the true issue.  This is not about whether I "think it is fair" that some CEO make "too much" (too much according to whom?  no answer).  This is about whether an individual, ANY individual, and whether YOU have the ability to enter into a private contract with or without the approval of society.  This is about the freedom of an individual (and private company)  to have the choice and liberty to voluntary decide to trade on terms they wish to honor.  The statists in our society have chosen a populist, personal issue surrounded by class warfare and the fanned flames of envy to cloud the issue.  Storm