“There is a strong case for adequate incentives for performing executives. And compensation in money is far preferable to hidden compensation such as perquisites.” Peter F. Drucker

He somewhat rationalized this by calling this “make-believe money” with its function being status rather than income. Admitting however, that this illusion did socially and psychologically create harm and destroyed mutual trust between groups, his suggestion to deal with this was to get companies to commit to a maximum range of after-tax compensation of the 1 to 10 ratio. He also felt that part of the company’s social responsibility was to work for tax reform and to eliminate “tax gimmicks” a concept that is still in the news today in the U.S.

Returning to his earlier views he continued by stating, “There should, I would argue, be room, however, for an occasional exception: the rare, “once-in-a-lifetime,” very big, “special bonus” for someone who has made an extraordinary contribution.” He also felt that compensation should be in the form of money that allowed the executive to pay for what additional “hidden” benefits or perquisites the company was providing. Once again, we will see how this is being handled since Drucker initially addressed this issue.

Drucker also was somewhat critical of other benefits that were provided to executives such as retirement benefits, extra compensation, bonuses, and stock options, particularly if the objective was to tie the person (known today as “golden handcuffs”) to the organization. He argued that these benefits actually related to “past employment” and the individual should be entitled to them even if they leave the company. If not, he suggested that rather than forfeit these benefits, the individual would remain with the organization even if performing poorly and unmotivated.