The business relationship between a companies shareholders and management can be a strained one. When a company starts making money, shareholders understandable want a cut of the profits. This is understandable as the investors are the ones who keep a company afloat before they make money. Management and other executives however are the people who are putting in the hard work on the ground floor. It is their work an intelligence that makes a company successful, so shouldn’t they be getting a big cut as well?
The problems usually arise when executives are making a lot of money but the company does not perform well. Indeed, a situation where a CEO is paid whether or not a company is successful is a sure fire recipe for disaster. Shareholders begin to blame the board of directors who hired the CEO. If the board of directors decided to pay a CEO superstar money, the have to be willing to absorb some blame when the whole thing goes awry.
The solution for shareholders is usually dividend payments. When the stock starts to perform well, the wealth can be spread to shareholder by rewarding them with a share of the profit. For executives, certainly they deserve generous compensation, but the really big money should be reserved for big profits.
When someone founds a company, they are expected to not only control the company but to receive healthy profits as well. However, that same executive must understand that when profits and shareholder returns are down, this should effect their wallet as well.
Annual meetings are a great place for shareholders to express their concerns over executive pay. Let the leaders of you company know that if you aren’t making a profit, they probably shouldn’t be either. For both shareholder and executive the goals should be the same, making the company and its stock profitable.