When a company is in trouble and without a CEO it can be difficult to find someone talented willing to risk the future of their career without being properly incentivized. A company’s board and shareholder’s will also feel pressure to find a replacement quickly to reverse the trajectory of the business. This pressure will occasionally result in compensation packages with strong incentives because the company is willing to sacrifice future upside that would otherwise benefit shareholders to stop the bleeding.
The challenge is that the risk assumed by the CEO is often forgotten when the company has recovered. Such was the case with Porsche CEO Wendelin Wiedeking:
Porsche AG Chief Executive Wendelin Wiedeking’s €68 million ($100.2 million) in compensation is adding fuel to debate in Germany about executive-compensation levels at a time of stagnant wage levels for ordinary workers.
Porsche’s executive-pay levels have drawn attention in Germany in part because Mr. Wiedeking has often embraced populist rhetoric while criticizing hedge funds and accusing some companies of putting the interests of shareholders above those of workers. Some industry analysts say that Porsche itself is behaving like a hedge fund.