Recommended Reading - Valeant CEO's Pay Package Draws Praise as a Model, WSJ

Joann S. Lublin wrote a story for the Wall Street Journal on the compensation package Valeant Pharmaceutical’s VRX (NYSE) CEO, J. Michael Pearson has had with his firm since 2008. Unlike so many CEOs, Pearson’s compensation was designed to be a real performance package. According to Lublin’s story,

… Directors of the midsize drug maker required him to buy at least $3 million in stock (when be began), forgo routine annual equity grants and hold many shares for years before selling.

No single element is unique, but the combination is rare — for a public company.

… Pay experts say the deal gives Mr. Pearson incentives to boost long-term value for investors. For example, the 49-year-old CEO only gets to keep certain restricted shares if Valeant’s share price increases at least 15% a year through February 2011. Mr. Pearson can’t sell most restricted shares or exercised stock options for two years after they vest.

… “Many companies would benefit from imitating this or moving in this direction,” adds Steven N. Kaplan, a University of Chicago business professor and pay researcher. “More pay for performance is a good thing.

This is the type of compensation package that needs to get a great deal more attention by shareholders, the press and even government regulators. If more and more companies look at this model and try and use it as a guide we may actually see compensation excesses fade as an issue.