Comments

Mr. Kilts argues that he deserved the payout because he created $ billions in shareholder value. Err... billions in the 4 years he was CEO? Single-handedly?

Put that aside for a moment and look at it this way: when he created these billions of value, he was remunerated by the business for his performance. He's now being remunerated against possible future value in the post-acquisition business. I know there are difficulties in accounting properly for these things, but I'd be a lot less uncomfortable about this level of payout if it was largely tied in to future success.

Posted by Mark JF at December 12, 2005 11:22 AM

Tom, what is it with you and these 'big mergers'? It's like a cause celebre or something ... if it's not AOL-TIME its Gillette, if it's not Gillette its some other gargantuan organiztion trying to make themselves ever more gargantuan ... Are you against this strategy period? Cause its OK to want to get bigger, right ... and it's got to be OK to want to get paid bigger sums of cash for making the company bigger? If shareholder value is added, shareholder value is added and why shouldn't the CEO be compensated (even if the sum is disproportionate to the blue-collar worker's lifetime paycheque - the CEO has compensated millions of BCW's after all)?

Anyway, tell me, what 'big company' merger DO you approve of? (I'd be fascinated as I'm sure it's got to be good)

Posted by Daniel M. Harrison at December 12, 2005 12:48 PM

Daniel - let's take your comment, "If shareholder value is added, shareholder value is added and why shouldn't the CEO be compensated..." No reason at all why he shouldn't be compensated. I just can't think of any reason why all the other Exec Officers, VP's, Sales Managers, Warehousement etc shouldn't have a little slice of the pie as well. After all, they've probably been around longer and probably contributed to the ideas and initiatives that generated the value in the first place.

Posted by Mark JF at December 12, 2005 2:18 PM

>One can at least mount a plausible argument to support CEO pay levels...

Given increasing differentials between 'boss' and 'slave' (yes, I'm aware how open to misinterpretation those terms are) wage levels, I wonder just how plausible - when viewed with fresh perspective - such a case really is. For those so-minded, Mondragon offers an alternative whereby the high->low multiplier is reduced.

Honest question: would our healthcare be better/worse/same if more of the money went to those doing 'the real work, at customer level' - and by this I mean nurses etc - with a consequent reduction in exec payouts and over-priced surgeons?

Posted by gulliver at December 12, 2005 7:46 PM

I agree with Tom. The payouts are >unreal< and the CEOs just continue to separate and push themselves out further from the real world and deeper into FantasyLand! This helps to explain why companies are so out of touch with their employees.

Sorry, just had to give my FantasyLand point of view (from an employee's perspective). I worked for one of the CEOs listed in Tom's post. I have since left the company. Main reason was because all you heard all day was this strange sucking sound (like a vacuum cleaner). Today, I learned what that was - it was the CEO's wallet sucking the life out of us and filling up his wallet! Screw that - I left and am happier than ever. No more sucking sound!

Cheers,
Chuck

Posted by chuck at December 13, 2005 12:06 AM

Well, there is absolutely no doubt that America's top executives had plenty to celebrate as they tucked into their turkey this Thanksgiving — a resurgent stock market, record profits and, above all, their own ever-expanding pay packets. Executive compensation in America—already far ahead of the rest of the world, despite the best efforts of overseas managers to catch up—is now rising inexorably again. In fiscal year 2004 the total compensation of the median American company boss rose in every industry, by between 9.7% in commercial banking and 46.1% in energy, according to a new report by the Conference Board, a research organization.

In 2004 the ratio of chief executives' compensation to the pay of the average production worker jumped to 431 to one from 301 to one in 2003. Many experts see the continuing rise of executive compensation—and the continuing lack of a demonstrable link to performance—as a symptom of a massive failure of corporate governance. Greater pressure from shareholders is generally regarded as the only real antidote. So is there a cure? Certainly, fuller disclosure would help, argues Lucian Bebchuk of Harvard Law School and co-author of a recent book, “Pay Without Performance: The Unfulfilled Promise of Executive Compensation”. If there were proper disclosure of forms of executive pay such as pensions, supplementary pensions and deferred compensation, then it would be easier for shareholders to see whether chief executives are being rewarded for genuinely good work.

Posted by K.Sriram at December 13, 2005 5:08 AM