Comments

Tom

We will all FEEL your frustration BUT ... here is somethinng I posted on my Blog a couple of months ago

Never give up!! (ps Never give up) (pps Never give up)

When all the work we are doing seems pretty pointless, all our effort is not being acknowledged and no one seems interested we must not lose our vision and our belief in what we are doing.

Annie and I were listening recently to the story of Winston Churchill who re-visited his old school to give an address when he was in his 80's. The expectant young men were looking forward to one of Winston’s great speeches. The entire school gathered in keen anticipation. Churchill stood up and addressed the packed auditorium and said;

“Never give up …. “Never give up …..Never give up.”

Then he sat down.

That WAS Churchill's speech.

Posted by Trevor Gay at April 11, 2006 12:50 PM

The problem is that a) "comparison to others" becomes a self-fullfilling (enriching?) and ever-upwards spiral when people with a vested interest sit on comp committees that look at other highly-paid persons who probably set the salaries for those people on the comp committee; and b) given that business life today means you'll probably be forced out of the job and unable to work at the same level afterwards, you want the most you can get from your 15 minutes at the top.

A shareholder in Sun Life of Canada proposed a motion for this year's AGM that limits the increase in the total compensation of members of the exec team to the increase in the shareholders' dividend. The Board recommended we vote against it. I've voted for it. It mightn't be ideal but a link between shareholder reward and exec reward seems a good start to me.

Posted by MarkJF at April 11, 2006 1:34 PM

Gotta love that board! First to approve the comp but then to try to justify it???? Sometimes it pays to keep your head down, your mouth shut a pray that something else will divert attention from you.

Posted by Ed Di Gangi at April 11, 2006 1:43 PM

And let's not forget the ridicules pay rate
Carly Fiorina earned at HP. Did she deliver value to the shareholders?

Posted by xsm at April 11, 2006 1:56 PM

Tom, you're not giving up... you're defecting.

MarkJF, I have a hard time with the notion of performance based on shareholder value. It still seems so short-sighted and manipulable.

What is the best indication of executive performance? Maybe a percentage should be contingent on successful succession in order to avoid golden parachutes. Maybe customer satisfaction should be a metric to include. What about employee input? We need a forensic economist to give insight into the measurable evaluation of executive performance.

Posted by DUST!N at April 11, 2006 2:19 PM

Essentially the CEO got a 50% raise while the shareholders got a 25% cut. Obviously the guy is serving the shareholders well (well-done that is.) He also managed to stiff 50,000 managers. I have to agree that this is way off base. The buck stops with him and obviously the board thinks that losing money is something he should be rewarded for. If I were a shareholder I'd be trying to get a new board.

Posted by Buz Dale at April 11, 2006 2:23 PM

Guys like this at American companies better get a grip or people will complain enough and Congress will act. Then we will have a real disaster on our hands.

Executives have a moral obligation to their shareholders and employees. Companies have become the personal piggy banks for executives.

We should not be surprised. Ivan is from the hippy-dippy 1960's crowd. (Born Dec 10, 1946) What we have come to is the point where all the ex-hippies running companies. The Me Generation indeed. Scandle, pay at mind-boggeling levels, disregard for employees and shareholders,etc, etc, etc.

Insanity. Men like this have no place in executive management.

Posted by lasotac at April 11, 2006 3:09 PM

Oh the free market - the basic principal of Demand & Supply. Whether or not they perform, their pay is outrageous but so are footballer's not to mention lottery winners but they are byproducts of our market system.
Someone's willing to pay. My big problem is with the individual. You got to have balls to accept that kind of pay, underperform and still be able to look people in the face. Shareholders should change the drugs they are consuming - the side effects are blatant.

Posted by Nuno Lopes at April 11, 2006 4:22 PM

Excellent. One of the best posts I have read in the last times. Pondered and critical at the same time. I agree, though there must be something working wrong in the markets if these things happen from time to time and they are allowed. Some companies seem to be the forts of corporate managers.

Posted by Felix Gerena at April 11, 2006 5:25 PM

I simply cannot get my head round these figures. The most obscene form of power is money. Money has become a religion. Money is worshipped more than the real thing. We all want money - we all have to eat, but somewhere along the line someone is having a laugh. Do you think these guys ever look in the mirror and ask themselves 'did I deserve that money'?

Posted by Trevor Gay at April 11, 2006 6:42 PM

Here is how Coca-Cola compensating its board of members. It's the right way. The idea could be modified but it SHOULD BE the way companies compensate their CEOs.

http://www.bizjournals.com/atlanta/stories/2006/04/03/daily29.html

Posted by Can at April 12, 2006 1:18 AM

Dust!n - I agree that the Sun Life scheme I mentioned above is not ideal and can be manipulated, but then so can other schemes. Maybe they could tweak it to cover some measure over a period of time, but then a new guy will argue that his compensation shouldn't be governed by the legacy he picks up from his predecessor. It's another classic case of "one size does not fit all" but at least it's an attempt to do something about the problem. I'm generally pro-market and anti-red tape but here I think senior compensation should be proposed by the Comp Committee and then subject to a 66% shareholder vote.

Posted by MarkJF at April 12, 2006 1:26 AM

I doubt that anything saps morale more than learning that while your salary is frozen, the ceo got a raise and a bonus.

A relative of mine in the US said to me - only half kidding - If his CEO took a piss break, the cost of that time was his monthly salary. If he took a dump, the cost of that time was his yearly salary.

But I'm also a bit skeptical. If the best of the best indeed get to the top and become CEO, shouldn't they be disproportionately rewarded? After all disproportionately good pay for disproportionately good performance is the right way to go to keep stars in your company?

But where do you draw the line? And will the line be accepted by compensation consultants, boards and CEOs.

We're beginning to see oversized salaries for CEOs in the Netherlands, but they have a long way to go before they meet their brethren in the US on that level.

Posted by Arun Sadhashivan at April 12, 2006 1:45 AM

The $185,000,000 for Kilts of Gillette M&A with P&G makes it easy for me to boycott all their products and services.

Adidas and Reebok combined now and plan 10,000 employee layoffs ... with subsequent $100's of millions for their CEO's - easy to stay loyal to Nike.

Posted by Sean at April 12, 2006 8:49 AM

10 years ago a guy with a yellow dyed mohican haircut, a ring through his nose, and a dog on a string... said to me that, basically, all big business was corrupt!... being a dyed-in-the-wool big business consultant, and having sunk my life energy into advising big business, i told him he was wrong.. i told him that he didn't really understand business...

and now?.. well, and now i know he was correct all along.

Posted by onehandclapping at April 12, 2006 9:04 AM

Why not have shareholders vote on CEO compensation ? The proxy ballot could have multiple choices -- (a) The Compensation Committee's recommendation; (b) the CEO's request; © the median for comparable companies; (d) the previous year's compensation; (e) the same percentage change as the stock price;(f) a written-in amount.
While the voting will still work in favor of the CEO due to the institutional investors, at least there would be some voice.

Posted by H-Bob at April 12, 2006 11:11 AM

One hand clapping - that is a great story.

I met someone who could have been the guy's brother a few weeks back here in England in my local railway station just down the road from me.

He had a beard, he smelled a bit and he had obviously been sleeping in the station waiting room all night. He explained to me he had been a senior manager a few years before and had fallen on hard times. He was very wise and as I bade him farewell and got on the train on my way to meet some pretty senior managers I couldn't stop thinking about the man I had just left. I could be totally off the mark of course but my feeling was this old guy was probably just too nice to survive at that level.

Posted by Trevor Gay at April 12, 2006 11:15 AM

I think that the key issue in this is that these are PUBLIC companies, meaning that they are owned by large #s of people. The SEC is empowered to protect shareholders (almost 50% of all Americans are essentially the "owners"), and the boards of directors are in place to hire, fire and hold accountable the management of these public entities.
I have no problem with the owner of a company that he started making as much money as the company can pay out in profit. The issue with public companies is that they should be paying the "owners", not the "managers". And of course the boards should be accountable to someone besides the CEO/Chairman(who, of course, should have no role in hiring the Board!) This just seems reasonable, so I can't figure out how it got this screwed up. Anyone?

Posted by Bob Allard at April 12, 2006 12:59 PM

I am not naive enough to expect it. But I think it says a lot about leaders at this level that they don't volunteer to take less money.

I am with Bob on this - the real leaders, to me are people who start something new from scratch and build something great.

I know it is a fundamental building block of our economic model but I just can't help thinking that Public companies are basically, well, crap really!

I have worked for Public and private as well as private that became public and every time the process of becoming public turned what was a great comapny into something average - especially from the customer and employee perspective

Perhaps a thread on public Vs private might be interesting?!?!?

Posted by PaulH at April 13, 2006 1:39 AM

Tom, you're not giving up. I suspect you're just getting started.

I believe in markets as well. I believe that the financial markets should be the force that influences executive compensation. I think part of what makes people so angry about these compensation packages is that, when the story breaks, it seems it's always too late to do something.

Perhaps what's needed is the certainty of an announced, transparent, long-term system for compensating executives.

Think about it... if an organization had cost certainty around the issue of executive compensation, and investors were fully apprised of those financial obligations, that would remove some of the uncertainty that can hold back stock prices.

Furthermore, if both executives and investors knew that the primary interest of current executives was the long-term value of shares (perhaps because they were paid in shares?), that would generate market confidence in the company (and, I’d wager, some better decision-making).

Let's take this one step further. Imagine a collection of companies in a given nation announcing to the market that they would follow a structured system for executive compensation, and revealing the details of the system. Think how much global capital would flow to that market and that nation as a result of such a system taking hold.

Now, here's the challenge for you, Tom. Ever since the book was published in 1876, the world of meetings has been better off for the existence of Robert's Rules Of Order. Maybe now is the time for Peters’ Rules Of Pay.

Are you up for it? Have you changed civilization yet today?

Posted by Steve L at April 13, 2006 9:57 PM

Two items that come to my attention with these persistant payouts:

The lack of character by those who accept and approve them - when poor company performance and the treatment of employees and shareholders are weighed in the balance.

and the short-term thinking. Apparently, no one involved believes there will be a downside sufficiently big-enough to discourage them.

As a former corporate employee, - who is now independent, loving my life and my work more than I ever did in a company, and on my way to earning more than I ever did - I'm sure there will be long-term ramifications. Those ramifications include more individuals who make the choice I made, to exit the "system".

A system too weak in character and integrity.

As always, the best will leave because there are other, better options. And then who does the board hire?

In the growing competition for
really talented leaders and executives, many companies are shooting themselves in the foot.

Que sera sera!

Posted by Milagro at April 14, 2006 3:52 PM

Some things that don't seem to get said in the debates about top executive compensation.

1) CEOs of public companies and workers at those same companies are operating in different marketplaces when it comes to compensation. Workers are in an economic marketplace where value is measured relative to company goals. CEOs are in a star marketplace where value is measured compared with other, similar folks.

2) CEOs, by and large, operate in a self-policing environment. Self-policing is the ultimate form of corrupt power.

3) Workers, by and large, do not care if the CEO makes a ton of money as long as they feel they are being treated fairly and everyone is doing well.

4) The major problem with out-of-balance, disconnected-from-performance compensation is that it corrodes the bonds of trust. How can I, as a lower level worker, believe that you, the CEO, and I are working for the same thing when it looks like you're out for yourself, not the company, and when you're insultated from poor company performance and I'm not.

Posted by Wally Bock at April 21, 2006 12:56 PM