EAST LANSING, Mich. — CEOs are sometimes rewarded for taking excessive risks – a practice that helped fuel the recent recession but could be altered if companies are more strategic in how they compensate their chief executives, a Michigan State University scholar argues in a new study.
Instead of issuing stock and stock options in predetermined quantities, boards of directors should vary a CEO's equity-based compensation through a plan that fosters the amount of risk-taking the firm desires, said Robert Wiseman, chairperson and professor in MSU's Department of Management.