Post by Rice Business

Short-term CEO pay tends to draw criticism from investors, governance advocates and academics alike. The thinking goes: If executives are encouraged to prioritize near-term targets, they may sacrifice long-term value for immediate results. They might rush sales, for example, or fast-track products to meet their numbers. It’s a valid concern. But it assumes companies operate under stable conditions. “It’s easy to say long-term is always better,” says associate professor of accounting Brian Akins. “But when a company is facing pressure from its lenders, shifting the CEO’s focus to immediate results can protect both the company and its investors.” Co-authors: Jonathan Bitting — Appalachian State University David De Angelis — University of Houston, C.T. Bauer College of Business Maclean Gaulin — University of Utah - David Eccles School of Business