When imagining your retirement, I hope you're not picturing sitting in a gloomy shed, eating from a can of cat food. Chances are you imagine a relatively comfortable lifestyle -- a modest home, a little travel, and so on. (By the way: Are you on schedule with your retirement saving and investing?) You might want to dream bigger, though. Imagine retiring like a CEO.
In these scandal-ridden days, we may be used to seeing CEOs do the "perp walk." But many CEOs are busy doing the "perk walk." One might think that the recent focus on executive compensation -- and overcompensation -- would put a damper on the riches bestowed on corporate bigwigs. But as Claudia Deutsch noted in The New York Times, that hasn't happened in any big way: "The chief executives at 179 large companies that had filed proxies by (late March) -- and had not changed leaders since last year -- were paid about $9.84 million, on average, up 12% from 2003, according to Pearl Meyer & Partners, the compensation consultants." You got a 12% raise last year, too, right?
Deutsch offered some discouraging examples of how irrational many compensation packages are: "Net income at Eli Lilly (NYSE: LLY ) fell 29% and its return to shareholders dropped 17% last year, but its chief executive, Sidney Taurel, saw his pay go up 41%, to $12.5 million.... Similarly, Sanmina-SCI (Nasdaq: SANM ) , the electronics contract manufacturer, has lost money in each of the last three years, and its shareholders' total return fell 27% last year, but the pay of its chief executive, Jure Sola, jumped to $15 million from $1.2 million in 2003." Blockbuster (NYSE: BBI ) lost $1.25 billion last year, but its CEO, John Antioco, received "$7 million in salary and bonus, 5 million options and nearly $27 million worth of restricted stock."
Fortunately, there are some firms exhibiting more logic. Deutsch noted that, "When net income at Aramark (NYSE: RMK ) , a food services company, slid 13%, total pay for Joseph Neubauer, its chairman and chief executive, fell 20% -- and his bonus shrank 47%. When net income at Unisys (NYSE: UIS ) , the computer maker, plunged 85% last year, Lawrence A. Weinbach, then its CEO, got no bonus and saw his overall pay drop by 17%." At Coca-Cola Enterprises (NYSE: CCE ) , CEO John Alm stands to lose all his restricted stock shares if he leaves the firm within five years or if the stock price doesn't rise as targeted.
So what are we to do? Well, here are some suggestions:
- Become a CEO! Rise to the top of your company, and you're likely to enjoy a fat salary and bonuses, conferred upon you by a board of directors of your peers.
- Failing that, try to act like a CEO. Inform your employer that you'll be asking for a hefty raise -- for example, from $45,000 to $4.5 million -- and that you'll be having some friends and associates, to whom you're paying a few thousand dollars, vote on whether to grant it to you.
- Failing that, be an active shareholder. When it's time to submit your proxy vote, don't just toss away the ballot or vote as management recommends. Instead, read the shareholder proposals and support those that urge greater disclosure of bigwig compensation and greater linkages between pay and performance. If you don't see such proposals, consider making some of your own.
While you keep an eye on the retirement packages of executives, keep an eye on your own, too. If you don't have a plan in place and aren't on track to have enough to retire on, take advantage of a free trial of our Rule Your Retirement newsletter. The lead writer for the newsletter is our Robert Brokamp. Check out his inimitable style in these articles:
Finally, you can ask questions and get answers on our Retirement Investing discussion board -- or at least drop in and see what other Fools are saying.
Longtime
Fool
contributor
Selena Maranjian
does not own shares of any companies mentioned in this article.
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