Wednesday, August 26, 2015

Structuring compensation incentives...

From Charlie Munger: The Complete Investor:
Munger believes that structuring compensation incentives is critical. If the right structure exists, then a seamless web of deserved trust can be created which lessens problems related to this tendency. For example, it is surprising how many people fail to recognize how performance suffers if you pay someone in advance rather than after the work has been completed. It’s precisely because of the dangers of misaligned incentives that Munger and Buffett chose to make compensation decisions themselves, whereas they delegate almost all management responsibilities.