Most CEO’s already receive forms of compensation tied to the long term return on the company’s stock price. In theory, CEO’s get paid what they get paid because that’s what they would command on the open market. But I think that there’s alot of behind-the-scenes handshaking and wink-winking between CEO’s and directors going on to elevate this pay. I personally feel that the government should audit CEO pay packages with the purpose of protecting shareholder rights. And I think that companies should have to prove that there was real competition for the position.
The fact is that a CEO’s impact on the future success of a company isn’t as great as some may believe. A business’s success ultimately depends on factors that it controls (costs, investments, etc.) and on factors that it doesn’t control (its market, costs of raw materials, etc.). How much can a CEO really affect either? Not much, in my opinion. Any CEO would be faced with the same set of strategic decisions, and it usually doesn’t take much skill to pick the correct ones from a list of options eg. People like using mobile phones? Let’s put up towers. Duh. The CEO’s not coming up with the idea of mobile phones.
Since shareholders can’t seem to understand this and police CEO compensation, it’s the government’s responsibility to monitor the process of determining compensation. I think that this would drive down pay packages significantly.
For these very same reasons, I disagree with the OP’s idea. Why should a CEO have to give back her salary if the company doesn’t do well? None of the other employees have to give back their salaries. And in fraud cases, CEO’s are already personally liable with all of their assets on the line.
To me, the fairest and most effective way to reduce CEO salaries is thorough examination and public communication of the process.