An excellent article……

The executive pay system is broken

In the wake of the failure of WaMu and Lehman Brothers, some say the system may have spun so far out of control that it pushes executives to adopt strategies that damage the companies they run, rather than improve them.

Berkshire Hathaway Chairman and Chief Executive Warren Buffett said this month that the main cause of the current financial crisis was excessive compensation, which encouraged executives at financial institutions to take on too much leverage.

“The crisis exposed flaws in exec compensation, showing the system encouraged risk-taking without an appreciation of the ramifications, which in some cases were entity threatening,” said Bob McCormick, chief policy officer at corporate governance advisory firm Glass Lewis. “In good times, executives get paid extremely well and in bad times they get paid just very well.”

Buffett blamed large institutional shareholders for not speaking out enough against lavish CEO pay. He also fingered directors for rubber-stamping compensation plans and consultants for helping companies exceed the excesses of rivals, year after year.

I strongly encourage you to read the whole thing.