Did anyone at Abercrombie & Fitch (NYSE:ANF) bother to consult a stock chart before deciding on CEO Mike Jeffries' compensation?
Jeffries lands at No. 10 on the list of 2008's highest-compensated CEOs, according to The Corporate Library. His lofty reward for a year marked by disastrous results at his company only emphasizes CEO pay's continuing disconnect from anything resembling reality.
Where's the performance?
Jeffries raked in $72 million in 2008, according to The Corporate Library's list. It calculated "total realized compensation," which includes vested shares of restricted stock and stock options that were exercised. In Abercrombie's proxy statement, Jeffries' compensation -- excluding these items -- is listed as $15.9 million.
Abercrombie & Fitch's business has been in the doldrums for quite some time now; its shares fell 70% in 2008. Sales growth has slowed dramatically since the fiscal year ended January 2006, actually decreasing in the latest completed fiscal year. Meanwhile, earnings per share have fallen steadily since the year ended February 2008. If Jeffries' pay is commensurate with his performance, I'm just not seeing it.
Retail reality disconnects
Many retail CEOs are still living large despite their companies' lackluster 2008 performance -- even by the simpler, less hair-raising standards of the compensation calculations available in 2008 proxy statements.
Consider Gap (NYSE:GPS) CEO Glenn Murphy's $9.3 million in total compensation, according to the most recent proxy statement. That's a 49% increase from last year. You may also have forgotten that RadioShack (NYSE:RSH) -- pardon me, "The Shack" -- even existed. Nonetheless, CEO Julian Day's total compensation rose 11% to $9.8 million.
Starbucks (NASDAQ:SBUX) missed a chance to shine recently, as it cut workers and only made slight cosmetic changes to executive pay. Talbots' (NYSE:TLB) made a sad and poor move when CEO Trudy Sullivan received a $1.2 million payout to offset reductions to her retirement plan, all while her company cut positions, reduced benefits to remaining rank-and-file workers, and remained mired in a long-term slump.
On the other hand, it's easy to argue that significant pay increases for CEOs at Aeropostale (NYSE:ARO) and The Buckle (NYSE:BKE) are warranted, since both companies were retail outliers in the last year. But pay hikes that actually make sense seem to be the exception, not the rule.
The one place CEOs and unions overlap
Say on pay should be available at more companies, so that shareholders can at least voice displeasure about clear discrepancies between pay and performance. I recently suggested that CEOs and boards need to voluntarily do the right thing when it comes to pay. If they don't, shareholder pressure certainly would help encourage less outrageous behavior.
But wait, aren't outrageous CEO salaries just another product of the free market? Maybe so, but I also believe in holding folks accountable by realistic measures. We need to start emphasizing merit and rewarding performance, instead of indulging the too-often nonsensical pillaging that masquerades as a reasonable status quo.
CEOs who earn millions to preside over corporate train wrecks seem eerily similar to the worst examples of unionization. No matter what you actually do, you get the same pay as long as you show up -- and you can hang around as long as you want. I may have insulted many of the UAW faithful in the spring when I envisioned running a household like a union, and giving a kid an allowance no matter how much or little they do around the house. Still, I think that analogy applies equally well to outrageous CEO pay disconnects. It simply isn't good business sense.
Sadly, it seems clear that some have suffered more than others from the ravages of a troubled 2008. Company leaders shouldn't be doing just as well financially, if not even better, while shareholders and employees take monumental financial punches to the gut. The guys at the top deserve an equal share of the sacrifice, especially if they expect an outsized slice of the rewards.
