How much is just right? ...Read the full article
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Alex Todd from Toronto, Canada writes: There is not doubt that directors must have some skin in the game. In other words, they should assume appropriate risks and should benefit from appropriate rewards, commensurate with the company's performance.
However, I would caution against boards that assume lower risks and benefit disproportionately from higher returns than other stakeholders (namely shareholders). Directors should be required to own shares of the company that they purchased with their own money. Since they have more control over the performance of the company than do other shareholders (and therefore enjoy a lower risk of ownership) they should proportionately increase their risk of holding the shares by paying a premium for them. That premium could be paid back to them by the company in the form of directors' fees and performance incentives to even out the risk-reward equation over time. It seems to me unreasonable that directors should be allowed to benefit disproportionately over other stakeholders (shareholders) from a risk-reward perspective.
Alex Todd
President & CEO
TE Research
TEResearch.com- Posted 25/10/06 at 12:51 PM EST | Alert an Editor | Link to Comment
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