clair015

How to reward CEOs and other top executives is an ongoing area of discussion and research. Often it is claimed, of course, that executive compensation should be closely tied to the performance of the firm (but that stock options – an often-used way of rewarding executives – are quite imperfect, for instance because they can be exercised over an extended time regardless of performance). Yet, it is not easy to measure “the performance of the firm”. Performance in terms of what? And performance over what period? Therefore, a decade or two ago, the use of so-called “long term incentive plans” came about; simply put, top executives receive rewards (in the form of stock or cash) on specific dates dependent on whether specific performance goals are met. Such incentive plans are thought to much more precisely link rewards to managerial performance, encouraging executives to direct their attention to long-term profitability rather than short-term gains. The stock market (that is, investors and ...

What do you think pharmaceutical companies spend most of their money on? R&D: the search for new drugs? Think again. True, pharma companies spend a great deal on R&D; studies show it comprises about 14% of their revenues. Yet, they spend about 1/3 of their revenues on Marketing. That’s right, on average, pharmaceutical companies spend two to three times as much on the Marketing of a drug as on its development. (Hence, next time you hear a pharma executive claim they need to charge such a high price for drugs because of the high costs of R&D, do frown at him fiercely!) By far the largest chunk of these marketing expenses are taken up by the practice of “detailing”; that is, a vast army of company representatives visit physicians to shower them with information, free samples, and persuasive arguments (and a “healthy dose” of free gifts and travel), claiming that the company’s drug is wonderful and really does what it says on the tin. The raison d’etre of this practice is that...