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Submitted by Samuel Munzele Maimbo on
I agree with the authors view that executive pay had a significant impact on the financial crisis. Human beings respond to incentives and we simoly do not have a formula for 'fixing' compensation in way that eliminates EXCESSIVE risk-taking. I am very much of the view expressed by Bruno Frey and Margit Osterloh in this months Harvard Business Review that we should stop tying pay to performance. It does not work. Worse: it induces executives to take company-killing risks; and forces a short-term perspective of the decisions making process. Although stock bonuses mitigate excession decision making, they do not sufficiently compensate for the lure of cash bonuses tied to short run performance.