Happy April Fool's Day! Read what we really think about CEO compensation.
Dear Motley Fool Community,
We are, first and foremost, students of the businesses that make up our public markets. We aspire every day to help you make money. Most matters debated and discussed across the river from Fool Global HQ -- in our nation's capital -- are of, at best, tangential importance to us. We avoid political posturing, seeking profits together instead.
Every so often, though, we have to jump headfirst into the arena of public policy because it's our duty not only as leaders of The Motley Fool, but also in the collective interest of the millions of individual investors who love us -- reading our books and newspaper column, benefiting from our market-beating investment services, and participating in our vibrant online community.
Just such an issue now compels us to take Superman-like action.
We're proud to announce that we've been working tirelessly with key members of the U.S. Congress to draft H.R. 401, The CEO Bill of Rights Act of 2007. This is important and necessary legislation because America's CEOs are under attack. Our corporate leaders -- all in, making a precious few hundred times the average worker today -- are being labeled greedy, self-dealing scoundrels. And who stands up on their behalf?
No one gives a darn about our leaders
It seems you cannot go anywhere these days without some activist ninny ranting hysterically in the business media about overpaid executives. You know what we're talking about. Comments and questions like:
- "He's the chairman and CEO and pays himself $14 million. That's wrong!"
- "Can you believe that CEO has his own Lear jet?"
- "Since the company is performing so poorly, shouldn't that CEO be fired?"
The din is growing so loud that you'd think every CEO was being chauffeured in a stretch Cadillac Escalade with platinum spinners, lighting cigars with stock-option certificates, while his company falls apart. We're losing perspective, people. Without these leaders, most of our public companies would be in shambles. Who would run our companies without these CEOs? If we let the "pay police" continue to pick at and pry into every filing footnote on compensation, we -- the common-stock shareholders -- will be the real losers.
CEO attacks = Lower investment returns
How does this affect you?
When picking your next stock, after you're done analyzing the fundamentals of the business, you might want to think about some of the non-business factors that will affect that stock's performance. Is it going to help or hinder your CEO's performance when he or she:
- is relentlessly criticized by the business media?
- is forced to completely reveal how much he or she is paid?
- is prevented from picking option prices to lock-in financial security?
- is personally liable when external or internal factors hurt the company?
We don't know about you, Fools, but as investors, we prefer to invest in companies where the CEOs are focused on doing their jobs, have absolute authority over company and personal bonus structures, and don't have to worry about so many gnats buzzing their ears trying to stop them from hiding their so-called unreasonable compensation.
Make no mistake: The Motley Fool has always stood for greater transparency when it comes to how public companies and Wall Street operate. However, there truly is such a thing as too much transparency, that moment when something is so crystal-clear it can no longer be seen and, in the process, loses all meaning. The high-beam light that's being shed on CEO compensation today threatens to burn us all. The downside is obvious. Fewer qualified leaders will sign up to run companies if they have to more clearly disclose the perks and option grants that they richly deserve.
In the coming days and weeks, we'll be spending $3.4 million for a national television, print, and radio campaign, featuring the two men and women in Congress that already support H.R. 401, The CEO Bill of Rights Act of 2007. Our first ad will appear during Desperate Housewives tonight!
We've drafted the legislation, but we need your help to pass it!
Please email us right now at [email protected], and join our crusade!
From there, please contact your local representatives and let your business associates and friends know that something needs to be done. We can do it together. Our CEOs need our help.
After all, as Whitney Houston sang, the children are our future ... but CEOs are our most precious resource. In both cases, let them lead the way.
David and Tom Gardner
To protect and care for corporate Chief Executive Officers and other purposes.
IN THE HOUSE OF REPRESENTATIVES
April 1, 2007
Mr. Nordella of Georgia (for himself, Mr. Jabs, Ms. Foirino, Mr. Dillore, Mr. Semul, and Mr. Mazilo) introduced the following bill, which was referred to the Committee on Financial Services.
To declare a CEO Bill of Rights in order to promote and protect America's most valuable human resource.
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the "CEO Bill of Rights Act of 2007."
SECTION 2. FINDINGS.
The Congress finds the following:
- (1) Talented and qualified Chief Executives are vital to the economic health of the union;
- (2) Recent events, including but not limited to excessive regulation, unfair policies, and unduly harsh criticism, have hampered the ability of these CEOs to perform their duties for the good of the American public.
SECTION 3. ACTION TO SELECT AND SAFEGUARD ESSENTIAL TALENT (A.S.S.E.T.)
WHEREAS healthy corporations are vital to the progress of the American state;
WHEREAS the Chief Executive Officer is the most vital individual in any corporate environment;
Therefore, the purpose of this section is to ensure that the position of CEO should rightly be restricted to those with adequate qualifications.
SECTION 4. FINANCIAL ASSISTANCE TO IRREPLACEABLE RESOURCES (F.A.I.R.)
WHEREAS the Chief Executive Officer is a vital human resource and a prime contributor to the health of the nation's economy;
WHEREAS competitive compensation ensures stewardship from corporate leadership and promotes innovation;
WHEREAS academic study has proved that individuals are best rewarded by compensation that is not only high in absolute terms, but also greatly exceeds that of their peers, in relative terms;
Therefore, the purpose of this section is to ensure just and rational compensation for America's Chief Executive Officers by means of a minimum wage constituting total compensation of no less than 800 times that of the average worker.
SECTION 5. PROTECTION FROM UNFAIR RESTRICTION OF KEY SUBSIDIES (P.U.R.K.S.)
WHEREAS financial and non-financial benefits are a necessary lubricant for the engine of capitalism;
WHEREAS cash salary and stock-based compensation alone cannot retain top-flight executive management;
Therefore, the purpose of this section is to prohibit the unlawful restriction of perquisites.
SECTION 6. MINIMUM EXPECTATIONS FOR RETENTION AND INDEMNITY OF TALENT (M.E.R.I.T.)
WHEREAS economic strength and confidence depend on fair and equitable treatment of the employed;
WHEREAS Chief Executive Officers constitute the most important members of the employed classes;
Therefore, the purpose of this section is to ensure that Chief Executive Officers be entitled to greater job security commensurate with their elevated importance to American progress.
SECTION 7. PRESS ACCOUNTABILITY, TRANSPARENCY, RESPECT, AND INSTITUTION OF OPTIMISTIC, TASTEFUL, AND INNOVATIVE CRITICISM (P.A.T.R.I.O.T.I.C.)
WHEREAS criticism of Chief Executive Officers can cause downward pressure on the price of related equities;
WHEREAS the increase in equity prices is of vital importance to the economic welfare of the United States;
Therefore, the purpose of this section is to protect Chief Executive Officers from undue criticism by any natural person or entity.
SECTION 8. BACKDATING ACTION FOR RELIEF AND FAIRNESS
WHEREAS excessive options-backdating scandals have unduly hindered the ability of Chief Executive Officers to fulfill their duties;
WHEREAS options-backdating scandals have exerted undue stress on our financial markets, namely by forcing down the prices of certain equities;
WHEREAS increases in equity prices are of vital importance to the economic welfare of the United States;
Therefore, the purpose of this section is to allow that Chief Executive Officers be exempted from all legal or financial responsibility for backdated options, so long as they are not shown to have been aware of the accounting implications.
SECTION 9. WAIVING ACCOUNTABILITY FOR FAIRNESS IN FINANCIAL LIABILITY EDICTS
WHEREAS American enterprises commonly comprise thousands of individual employees;
WHEREAS knowing the capabilities, conduct, and character of such number of employees is an insurmountable task;
Therefore, the purpose of this section is to allow that Chief Executive Officers be exempted from responsibility for material errors and weaknesses in their financial reporting, up to and including fraud, so long as said officers can claim that someone else was responsible for such shortcomings, misstatements, or frauds.