Stock Ownership by Management

I just heard a proposal that companies should require of their top employees, that they own an amount of stock in the companies they run equivalent to 4 years salary. This is in contrast to the common practice of granting options at specified future times to buy stock. This proposal causes these executives to focus on the long term state of the company and take a portion of the downside as well as the upside that stock options provide. The comment was the Gerstner imposed such conditions when he headed IBM and that preceded a turn-around for IBM.

This sounds like a good plan but it raises two questions:

It seems to me like institutional investors are in a good position to push for such requirements on management.

How do you attract competent management to a company with poor prospects? It seems clear that you must pay them more under this plan. If you cannot afford that, it is perhaps time to close down the company.