Does AIG Really Pay for Performance?

Excellent piece by David Leonhardt today unravels the myth of executive performance-based pay.

David writes about retention bonuses at AIG:

"Most amazingly, the A.I.G. bonuses haven’t even accomplished their stated goal. Andrew Cuomo, New York’s attorney general, said Tuesday that 52 employees who received bonuses had since left A.I.G."

As there is more sunlight coming in, long held beliefs about executive compensation are falling down around us. As I recently wrote about Silicon Valley, the 2-tier system of compensation that has sprung up in a weak IPO jackpot market (always illusory for rank and file employees) where bonuses are used to inflate compensation is taking a hit in this recession. Whether it survives depends on how and when shareholders and analysts weigh in.