The President of software maker McAfee just lost his job due to improper stock option practices over a 10 year period. The Chairman and CEO chose to retire. Just last week Apple CEO Steven Jobs apologized for his company’s mishandling of stock options. Other CEO’s have been arrested for fraud for their misuse of the widely popular executive motivator.
A study revealed that over 2,000 companies appear to have used backdated stock option grants to sweeten their executive pay. It estimates nearly 30% of companies used backdated stock options and nearly 15% manipulated them over a ten year period.
Stock options are intended to motivate CEO’s and key executives to perform better, not to cheat to get the reward. What does it say about a system where almost 1/3 surreptitiously achieve their objectives?
Nearly 5 years into No Child Left Behind, Texas schools show a similar pattern. Millions in federal bonuses are held up due to suspected cheating at 700 schools. What happens in 5 more years? How many principals will be fired, retire, or be such “stars” they get to apologize?
Without relying on extrinsic motivators to bribe people, leaders will have to return to their organization’s mission and each employee’s internal motivations. Paying people as much as possible, while doing everything possible to keep their mind off of money is advice our business and governmental leaders apparently cannot hear. Instead they want to spend more money trailing the problems created by the “pay for performance system” itself.
P.S. The Chairman and CEO of CNET Networks also resigned today for his role in inappropriate stock option practices