Outrageous CEO Pay – Who is Responsible?

Posted: October 17, 2008 by kibler in CEO pay, Workplace Issues
Tags: , , , , ,

Is it just me, or does it seem that fairness and equality are two terms that are totally foreign when it comes to the American workforce?

 

CEOs of some of the biggest companies in America are getting paid very well to:

1. Run their companies into the ground while

2. Laying off, downsizing or shutting their doors.

 

This has become very apparent over the last few weeks while the entire country has struggled with a massive financial sector bailout. We have yet to see how the $700B “fix” will be implemented and whether some financial institutions will continue to pay exorbitant salaries and offer golden parachutes for their CEOs at the taxpayer’s expense. AIG certainly seems to think spa treatments and golf outings are an acceptable way to use taxpayer dollars. CEO

 

In 1980, the average CEO of a major corporation made 42 times the average hourly worker’s pay. By 2000, the average CEO salary reached an incredible 531 times that of an average hourly worker.

 

Is tying executive compensation to the financial success of the company realistic? Does anyone honestly believe that all or most of the appreciation in the value of a company is directly related to the CEO’s talent?

 

24/7 Wall St has done an analysis of companies whose CEO’s need to see the writing on the filing and get ready to do some job hunting. Regardless of this type of projection of imminent demise, these CEO’s will probably enjoy a separation package that will soften any smack from hitting the pavement.

 

One such CEO was Michael Ovitz who enjoyed a $140 million paycheck for 14 months of work at Walt Disney. Shareholders sued but a Delaware judge ruled that the board did nothing wrong in awarding that huge severance package.

 

But Disney continues to be a solid company. Some boards award large packages to CEOs even as the executives trash their shareholders’ investments. Take, for example, Gary Smith of Ciena whose shareholders lost 93% during a four-year period, 2001-2005. His compensation during that time? $41.2 million.

 

Anderson Cooper has begun reporting on a new list, “10 Most Wanted: Culprits of the Crash,” featuring some of the most outrageous and egregious acts of greed on Wall Street, naming names of CEOs who have taken advantage of their companies, the bailout,  taxpayers and their own employees.

 

These outrageous compensation packages do not seem to have anything to do with the level of responsibility, or with how well a company is run. Wad of money

 

I know investors can vote with their feet – leave the dog that won’t hunt. And some activist shareholders fight overly generous pay. But another approach is to look for companies that have great performance and reasonably paid leaders. That is a sign that boards and top managers feel a responsibility toward shareholders, says Michael Brush, in an article on MSN Money. Brush includes a list of some of those companies as well.

 

But wouldn’t it just be easier if boards and search committees would hire people based on previous performance and – even more important – compensate more in line with what the company, and shareholders, can afford to pay?

 

Have you ever lost out because your company’s stock dropped, while the CEO was landing softly on a pile of cash? What are your thoughts?

 

 

 

 

Click here: CEOs Are Overpaid

 

http://money.aol.com/investing/ceos-who-have-to-go?icid=200100397x1206422760x1200354294

 

Click here: The 5 most outrageously overpaid CEOs – MSN Money

 

 

 

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