Professor Sudhakar Balachandran argues that by not choosing to forgo bonuses they were scheduled to receive, executives at AIG missed a chance to boost economic morale.
"We're missing a great opportunity here," Balachandran says. "This is the time for business to lead, not for business to sit there and say, 'We're contractually entitled, so this is what we do.' We have to restore people's confidence. The same thinking that got us into this mess isn't going to get us out."
Sudhakar V. Balachandran
Professor Sudhakar Balachandran is interested in performance measurement, corporate governance and valuation. These three subjects are sometimes referred to collectively as shareholder value management. Specifically, he studies how firms use performance measures to align the interests of managers and shareholders and create shareholder value.
Balachandran, who has more than 10 years of business experience, is a former management consultant at Ernst & Young and manager at Baxter Healthcare Corporation. He teaches the core course on managerial accounting, for which he was given the Dean's Award For Teaching Excellence in 2006.
Executive compensation and contracts are inviolate. That does not mean the compensation are excessive in light of the failure of the institutions. On the other hand the executives have a limited sell by date and looking at the current scenario most of them would be unemployed for long term and probably not get the compensation they are used to. Its very unlikely at tis point in time anybody would be sacrificing anything at all.The issue is human and much more complicated.
He gives lip service to contracts but in my view the agreement between the company and the worker of a fair wage for fair work doesn't become optional after the work has been performed. Imagine a world where the contract between company and worker could be discarded at a whim.
Notice how ready he is to ask someone else to lead by sacrificing their salary? He is so disappointed that leadership didn't take the opportunity to cut their pay. I wonder, when one of his students fails does he take a pay cut?
Also, the idea that compensation should track stock value is a sorry over simplification of the issue of executive compensation.