The executive pay model--yes, it works.

• Author: Kay, Ira T.

From Executive Pay At a Turning Point, edited by Ira T. Kay. Copyright [c]2012 by Pay Governance LLC. An e-book published by Pay Governance (www.paygovernance.com).

THE U.S. EXECUTIVE PAY MODEL is characterized by large amounts of cash and stock incentives, which are generally earned only if challenging financial and stock price goals are achieved. Furthermore, these stock incentives typically only achieve substantial value if the share price rises significantly. Most participants in the U.S. model--executives, board members and the preponderance of shareholders--believe that there is a high degree of alignment of pay and performance, properly measured.

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However, not everyone agrees with this assessment, and thus the U.S. executive pay model is at a turning point, a figurative fork in the road: in one direction, whether broadly to continue the current overall successful approach, with further corporate governance and design improvements; or, in the other...