The financial crisis focused a lot of attention on outrageous CEO and executive compensation. Unfortunately, while the general public may now be all too aware of these excesses, the folks approving or accepting these massive pay packages seem to remain blithely ignorant. But with shareholders rapidly growing fed up with getting so little bang for so many bucks, these overpaid execs had better get their act together -- fast.
Shareholders have had enough...
The recent Dodd-Frank Act mandated a slate of shareholder-friendly policies, including giving investors a say on pay, as well as allowing them to chime in on how frequently they should vote on compensation (also known as "say when on pay").
According to The Corporate Library's examination of this year's data thus far, out of 100 "say when on pay" votes that have already taken place, an overwhelming majority of shareholders prefer annual votes to biennial or triennial ones. Clearly, shareholders demand an active say on compensation on a regular basis. But while apathetic shareholders may be yesterday's news, questionable pay packages for CEOs and other bigwigs remain very much in the headlines.
... But executives apparently haven't
Last year, Occidental Petroleum (NYSE: OXY) reined in its compensation policy after a withering shareholder uproar over CEO Ray Irani's pay, which far exceeds levels at peer corporations. Though Irani will step down from his post this year, he's going out with a bang. His 2010 compensation skyrocketed to $76.1 million, more than double his pay the previous year.
Although Ford's (NYSE: F) arguably the best game going in Detroit's auto biz, CEO Alan Mulally's pay has come under fire. United Auto Workers' President Bob King called Mulally's $54.5 million worth of stock, disclosed earlier this month, "morally wrong." And this figure doesn't even encompass Mulally's total pay package; that information hasn't even been disclosed yet. (In fairness, Mulally did achieve the performance goals the company set for him several years ago.)
After looking over their company's squandered shareholder capital, Pfizer (NYSE: PFE) shareholders could probably use an entire array of the company's pharmaceutical products. Pfizer nearly doubled new CEO Ian Read's pay in 2010 to $17.4 million, even though he had just started the job on Dec. 5. Do the math on that one. Meanwhile, it also kicked in an extra $10 million on top of the existing $24.7 million windfall for exiting CEO Jeff Kindler.
Shelved in the "No, seriously, you've got to be kidding" section of the fiction department (right around where they keep Dan Brown's best-sellers and the Twilight series), busted Borders Group is trying to get permission from the bankruptcy courts to dole out as much as to $8.3 million in bonuses to its executives, including a $1.7 million payout to its president. Since when is bankruptcy considered a bonus-worthy job well done? No fair citing AIG as a precedent, guys.
The world is clearly changing, though, with shareholders increasingly saying "no more" to excessive compensation. Yesterday, a majority of Hewlett-Packard (NYSE: HPQ) shareholders voted down executives' pay. And after Beazer Homes (NYSE: BZH) shareholders shot down the companies' pay policies already this year, a union-affiliated pension fund has also filed a lawsuit against the homebuilder.
Time to get the message
The rampant greed that defined our most recent economic bubble might be a difficult habit for some corporate leaders to break. In a more humble post-crisis world, compensation committees would rein in pay, and CEOs might even request a pay cut, to nobly suffer alongside their workers. Despite increasing shareholder scrutiny, you shouldn't hold your breath for any of these pipe dreams to actually materialize.
However, major news outlets such as The Wall Street Journal and CNN are more actively covering the sort of controversies I listed above, and plenty of more focused sites and services like BNET, The Corporate Library, and Footnoted.com -- not to mention The Motley Fool -- are digging through the data, too.
If pay and performance don't start to find a reasonable balance, the issue may move beyond debate in the media and among the public. The Securities & Exchange Commission has already eyed regulating Wall Street bonuses. At the end of March, it's planning to draft rules concerning increasing the independence of corporate compensation committees, and decreasing conflicts of interest among compensation consultants and other advisors.
Frankly, it's pretty sad that some of corporate America's top brass simply don't understand that their greedy glory days are over. One way or another, though, they're going to get the message.
Check back at Fool.com every Wednesday and Friday for Alyce Lomax's columns on corporate governance.
