Runaway executive compensation has been in the spotlight of public scrutiny lately, given all the controversy over compensation related to government bailouts of entities like AIG
For ages, many of these guys and gals have gotten paid at levels most of us could never even dream of, and way too often, these grandiose pay packages don't match up with what anybody would describe as stellar long-term performance.
CEO pay has been becoming ever more outrageous for ages, too. According to Executive Excess, a report from The Institute for Policy Studies and United for a Fair Economy, in 2007, CEOs made an average of $10.5 million. That's about 344 times what the average American worker makes, and 30 years ago, CEOs "only" made about 30 to 40 times average worker wages.
Too wacky for words
I don't mind CEOs making good money if a company is massively successful, enriching shareholders, enriching employees, and so forth. I mean, that sounds like someone actually doing a good job, right? However, in too many instances, good performance is clearly not the case, even if executives, particularly CEOs, are paid handsomely.
Look at General Motors
(Of course, that also could remind us how compensation based on peer groups can often mean that many CEOs make way too much for doing way too little.)
And now, with the economic situation as ugly as it is, we're not only seeing controversy over executives at bailed-out companies trying to finagle big bonuses on the taxpayer dime, but we're also seeing a lot of companies whacking jobs (or reducing workers' salaries) when, I don't know, you'd think more CEOs might be willing to make some sacrifices of their own to help their companies' financial conditions.
A step in the right direction
Actually, some companies are paring down CEO salaries, and some are doing so even though their companies are still profitable. As much as we so often hear about CEOs who aren't doing the right thing (for example, I chided Starbucks
Crain's New York Business dug up a few examples of such instances. One example is, interestingly, a boutique investment banking company that didn't take any government bailout money. Greenhill & Co.'s
Crains quite rightly points out that given the fact that Greenhill performed so much better than peers, it was significant that neither individual demanded a raise and instead accepted the cuts.
Duff & Phelps CEO Noah Gottdiener is another example. His total pay fell 4% to $4.6 million, as his cash bonus was slashed by 26%. This was despite the fact that Duff & Phelps turned profitable in 2008 (its first year as a publicly held company). However, the company executive bonus pool had been reduced "due to the current economic environment."
Becton Dickinson & Co.
True, these figures don't count stock grants, and none of these guys are going to end up in soup lines anytime soon. But the spirit of actually weighing performance or the economic climate and expecting CEOs to sacrifice or take accountability in the pay arena is a start in the right direction.
Do the right thing
I'm most impressed by CEOs like Costco's
I have a little theory that there are some corporate leaders out there who understand that the best reward of a true businessman and entrepreneur is running a successful company with happy, loyal employees, which of course, transforms into happy, loyal customers and happy shareholders. When corporate "leaders" are too motivated by outright greed, they will keep on picking our pockets for a job poorly done.
I'm hoping for a shareholder revolution that calls for better policies, such as "say-on-pay" votes. At least then shareholder disapproval can be heard.
For the time being though, it's also good to emphasize not only the wrongdoers, but also the true leaders who do the right thing. If you can think of some CEOs that deserve kudos for making or accepting sacrifices in tough times -- maybe even to try to avoid having to lay off workers -- I'd love to hear of them in the comment boxes below. Celebrating doing the right thing, or at least making steps towards change, is a lot more positive than constant fury about greed, right?
I dug up some related Foolishness, past and present, from my archive:
More from The Motley Fool
This Will Cost Corporate America Billions This Earnings Season
Find out why tax reform is a two-edged sword.
Analyst Picks: 1 Insurer to Buy, 1 to Hold, and 1 to Sell
Goldman Sachs storms into the insurance sector.
3 Value Stocks for Retirees
With retirees living longer than ever, these value stocks offer an opportunity to really grow your nest egg.