Counterproductive CEO Compensation Packages

The average CEO compensation plan in public companies tends to be counterproductive to shareholder value, as many packages are tied to earnings per share (EPS) growth achieved through increasing debt and driving repurchase plans, which does not benefit equity shareholders. This approach allows CEOs and a handful of long-term investors to benefit from a lower share count and increased EPS, leading to CEO compensation. The design of these compensation plans implicitly disapproves of performance incentives and instead allows for gaming of numbers by saddling a company with debt. This approach, if left unaddressed, will influence how companies design their compensation plans and how CEOs perceive risk. Most CEOs prefer incentive-laden plans that are easily approved on the surface but actually undermine shareholder value. Specifically, the EPS targets for CEOs have been pointed out as detrimental, while plans based on pure profitability and performance, like Elon Musk's, have been punished.