Joe Torre certainly felt that the New York Yankees made him an offer that he could (and did) refuse, but most corporate financial officers would say the team took the right approach by focusing on performance incentives in its negotiations.
"The Yankees' offer is entirely appropriate and consistent with current executive-compensation trends in which more money is being put at risk," Michael Mardy, chief financial officer at Tumi Luggage, told CFO.com.
According to Mr. Mardy, who also serves on the compensation committees of two publicly traded companies, the Yankees' terms offered "a lot of upside" (up to $3 million in performance bonuses) to its former manager.
The current trend in corporate America is for companies to clearly define business goals and reward executives for achieving them. The key is setting appropriate business goals that advance the health of the organization and don't simply reward short-term gain while leaving a company exposed over the longer haul.
Executive pay has become a focus of financial market regulators.
"It's likely that a new Securities and Exchange Commission direction is pushing boards to develop more shareholder-friendly, performance-based packages," said Mr. Mardy. "The SEC has honed in like a laser on compensation issues."
I.H. "Chip" Clothier, managing partner at HFC Executive Search, said top executives are motivated by factors other than money.
"Facing business challenges is an intellectual issue for top executives. These managers are emotionally invested in the company - if they aren't, they shouldn't be in their position," Mr. Clothier told CFO.com.
Discussion Questions: What is your view on current compensation practices for top corporate executives? Do performance incentives improve performance in all companies? Is the Yankees/Torre situation uniquely different? What types of performance goals if achieved are worthy of additional compensation in retail organizations?