With all the talk about curbing exorbitant executive compensation packages and increased disclosure, I was reminded of an incident nearly 25 years ago, when I was accidentally sent a paycheck intended for Lenny, my supervisor.
Since it was in an envelope addressed to me, I opened it and to my disgust, discovered that despite being one of the most unpleasant and laziest people I’ve ever had the misfortune of reporting to, he was making more than three times my salary.
To put his unbalanced reward-performance ratio in perspective, it was like handing an Oscar to Steven Seagal.
I mention this because last week, the nation’s chief executive became only the second president since Reagan to visit the floor of the New York Stock Exchange during trading hours and later delivered a talk that focused on, among other things, encouraging boards of directors to hold chief executives more accountable by tying their pay into performance.
In his address to a cadre of Wall Street business leaders the president said that “the salaries and bonuses of CEOs should be based on their success at improving their companies and bringing value to their shareholders.”
Not exactly a radical theory, but nevertheless, one deployed with alarming infrequency across corporate America.
Not surprisingly, his comments met with a lukewarm response at best from a demographic that, I would imagine, supported him overwhelmingly in 2000 and 2004.
The timing of his remarks comes at a time when the average pay for top-tier executives is roughly 170 times greater than the rank-and-file workers. And that average includes those executives who through incompetence, greed, or both, have turned in performances that were mind-numbingly poor.
This scenario has prompted a flurry of criticism and outrage from shareholder rights groups as well as many Democratic lawmakers who have often harped on the ballooning gap between executives and workers as an example of a growing economic disconnect.
In particular it said executive’s pay package is in another galaxy in relationship to the company’s performance.
No doubt most of us have felt outrage and disgust when reading about executives who have exited companies with a literal suitcase of severance money.
Arguably, the most egregious example of this was the recent departure of Home Depot chief Robert Nardelli who, after resigning from the home improvement chain (rather than amend his gargantuan compensation plan), left with an incredible $210 million as a going-away present.
Experts have also warned that runaway compensation packages carry the liability of discouraging investors, while greater disclosure may prompt under-compensated executives to demand higher salaries and option packages when they discover what their competitors are drawing.
I for one, welcome greater transparency.
Trust me, it’s better to discover a higher salary in an understandably written report than through the shock of opening the wrong envelope.
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