http://www.nytimes.com/2007/04/12/opinion/...l?th&emc=th
Editorial
The Billion-Dollar Brushoff
Published: April 12, 2007
If there is a single, logical justification for the wild executive compensation packages that have become standard at large American companies, it is performance. In too many cases, pay has little or nothing to do with results, and some of the most jaw-dropping packages are for executives who have been told to hand over the reins.
This pay-for-failure is embodied by the $210 million package given Robert Nardelli, the former Home Depot chief executive. As Eric Dash reported recently in The Times, including Mr. Nardelli’s rich goodbye on the first workday of 2007, 36 chief executives ousted last year walked out with over a billion dollars between them. Mr. Dash points out that Hank McKinnell left as chairman and chief executive at Pfizer with an exit package worth nearly $200 million despite the fact that the company’s market capitalization dropped by over $137 billion while he was in charge.
And none of this takes into account the many excessive pay packages for executives clinging to their jobs with the help of compliant boards of directors, or those who received incentive-based pay thanks to inaccurate financial results. It is encouraging to see more companies adopting so-called claw-back provisions that help them get bonuses back after relevant misstatements come to light.
These multimillion-dollar sendoffs and mistakes must get pretty confusing for average workers who hear time and again that their wages cannot rise without making the company uncompetitive. Widespread revulsion at the growing disparity between the very richest members of society and everyone else has helped focus attention on ways to rein in executive pay.
Representative Barney Frank, chairman of the House Financial Services Committee, has proposed legislation that would give shareholders a nonbinding vote on compensation for top executives, similar to a rule in Britain. Executives there receive less on average than in the United States, though the gap has been narrowing. Giving the owners of a company a voice on how much management receives, even an advisory one, could put the brakes on some of the worst packages. And maybe it could help end the practice of excessive pay just to go away.
Editorial
The Billion-Dollar Brushoff
Published: April 12, 2007
If there is a single, logical justification for the wild executive compensation packages that have become standard at large American companies, it is performance. In too many cases, pay has little or nothing to do with results, and some of the most jaw-dropping packages are for executives who have been told to hand over the reins.
This pay-for-failure is embodied by the $210 million package given Robert Nardelli, the former Home Depot chief executive. As Eric Dash reported recently in The Times, including Mr. Nardelli’s rich goodbye on the first workday of 2007, 36 chief executives ousted last year walked out with over a billion dollars between them. Mr. Dash points out that Hank McKinnell left as chairman and chief executive at Pfizer with an exit package worth nearly $200 million despite the fact that the company’s market capitalization dropped by over $137 billion while he was in charge.
And none of this takes into account the many excessive pay packages for executives clinging to their jobs with the help of compliant boards of directors, or those who received incentive-based pay thanks to inaccurate financial results. It is encouraging to see more companies adopting so-called claw-back provisions that help them get bonuses back after relevant misstatements come to light.
These multimillion-dollar sendoffs and mistakes must get pretty confusing for average workers who hear time and again that their wages cannot rise without making the company uncompetitive. Widespread revulsion at the growing disparity between the very richest members of society and everyone else has helped focus attention on ways to rein in executive pay.
Representative Barney Frank, chairman of the House Financial Services Committee, has proposed legislation that would give shareholders a nonbinding vote on compensation for top executives, similar to a rule in Britain. Executives there receive less on average than in the United States, though the gap has been narrowing. Giving the owners of a company a voice on how much management receives, even an advisory one, could put the brakes on some of the worst packages. And maybe it could help end the practice of excessive pay just to go away.
