I recently had a conversation with a mother who decided to pay here children for getting A’s on their report cards. She was not clear enough as the child was making A’s or high B’s on 9 of 11 subjects. $10 per A and and very pleased with B’s. What she wished she had done was do some take away for D or F as 2 of the 11 subjects were likely to get D or F. We want a certain result and fail to see the bigger picture of overall picture of learning and aligning with values requires more than a few processes. Outcome was to place consequences on grades of C or lower.
Compensation experts are quick to point out faults of various types of incentive pay structures and having the “why” understood upfront helps all parities to perform and not overlook important issues. One money manager told me about a group of business leaders that met to share tricks of juicing up earnings and ways to get more money to the bottom line strategies regardless of risk and mission. A new type of risk evaluation is being applied to stocks that looks at sustainable practices and has ratings applied by outside parities like GMI. Governance Metrics International has some very cool ways of addressing risk and risk often overlooked by traditional methods. Some mutual fund companies utilize GMI as an added feature to contain or even predict risk in a stock. Even some the mainstream companies as addressing ESG as part of the appropriate incentives for corporations and it’s pay structure. Like the frustrated mother working to apply incentives for their children so we could all use help to get the right incentives for the right result. A properly aligned incentive is good for all. Do not be surprised as you read a lot more on incentive pay and bonus based on sustainable practices. Maybe if the post office had this in place decades ago we would have surpluses each year instead of current system? Maybe if we would actually hold boards responsible for actions then maybe the boards would do more to hold corporate leaders responsible.