Here is a wild idea: completely don’t pay any bonuses to executives at big public companies. This is the idea recommended in a Wall Street Journal article by Henry Mintzberg, a professor at the Desautels Faculty of Management at McGill University in Montreal. According to Mintzberg, executive bonuses “represent the most prominent form of legal corruption that has been undermining our large corporations and bringing down the global economy” and the “system simply can’t be fixed.” Mintzberg argues that the current bonus system rest on the following faulty assumptions in determining bonuses:
1. A company’s health is represented by its financial measures alone such as the price of its stock.
2. Performance measures, whether short or long term, represent the true strength of the company.
3. The CEO, with a few other senior executives, is primarily responsible for the company’s performance.
Moreover, Mintzberg argues that executive bonuses reinforces a class structure within a corporation “that is antithetical to its effective functioning” and “send out the worse possible signal to everyone in the” corporation. Instead of bonuses, companies should simply pay its employees, including the CEO, fairly across the board.
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