When it comes to corporate America, we find that those that are in upper management, such as the CEO, CFO, President, and so on, are often incentivized by the Board of Directors, with stock options which are dependent upon the stock price rising, which is of upmost concern to those then in management, as well as for those that are its stockholders. While this might seem to be a win-win for everybody in the sense that a higher stock price, typically reflects a corporation that is both growing and making sustained profits, the problem is that when that incentive is so lucrative and so desirable, that those at the highest echelon of corporate management, are going to be sorely tempted to do things that are unethical, deceptive, and just plain wrong, so that they can meet whatever goals have been set forth before them, and thereby collect their outsized stock option benefits. That is to say, while it is true that money is a great motivator for many people, we also find that money is a great corrupter for those who are tempted to push the envelope in order to obtain what they believe they have to have.
Indeed, an argument could be made that if huge stock options for upper management are so beneficial for the corporation, then it thus follows that this would also be beneficial for all those who are employed there to also have stock options, so that whatever is good for the goose should be good for the gander. The thing is though, while it is true that there are a fair amount of companies that do provide stock options for their employees, it is a truism, that most of those stock options for your standard employee, is something that is nice to have, but isn’t going to make them rich, or impact their life so dramatically, that they move up in class and status; whereas, for upper management, those stock options are worth millions upon millions.
The main issue with outsized incentives for upper management is that there is going to be a strong tendency not to disappoint the earnings and revenue numbers that Wall Street is expecting, quarter by quarter, which thus lends itself to manipulating the accounting books in a way in which earnings are managed and manipulated which thereby makes the best impression. So too, those that have stock options are going to be incentivized more times than not, to perform what they believe will help to “goose” the short-term profits as opposed to taking the time to make investments now in Research & Development, that might well serve the company a whole lot better.
Finally, when profit is everything, because one’s large bonus is dependent upon such, this puts one’s self-interest in the driver’s seat, and thereby that which concerns the community, the environment, or in general, doing the right thing, is going to take the back seat to that self-interest, and so to thereby believe that multi-national corporations are going to always do right by the people is belied by the fact that self-interest will always come first, and therein lies the rub.