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WORD COUNT
633
MAY 14, 2008
CEO PAY: AN INSULT TO THE NATION – by William A. Collins
Millions earned,
Where e’er they go;
Hail triumphant,
CEO.
Two cheers for James
C. Smith, chairman and chief executive of Webster Financial Corp. in
Waterbury. Mr. Smith turned down a raise this year because Webster
stock fared so poorly. Like it fell 40 percent. Adding insult to
virtue, Mr. Smith also scotched annual increases for other Webster
execs. He’s probably having trouble now striking up conversations in
the executive dining room.
Other CEOs are not so
restrained. Vikram Pandit agreed to take over Citigroup for a measly
$3.16 million in 2006, but now has received a tidy $102 million to stay
on. The board must really like him, plus they need to look as though
they’re doing something to get the bank out of the tank. Previously
Pandit was a hedge fund guy. No report on how his fund is doing in his
absence.
Corporate success, of
course, is not a prerequisite to fat pay. Angelo Mozillo, CEO of
Countrywide Financial, still made $22 million in 2007 (down from $43
million in ’06) even as Countrywide led our nation into its sub-prime
fiasco. He was miffed by the pay cut, but likely pleased not to get
instantly canned.
Although the board
deliberations that lead to these egregious salaries are secret, the
results often show up quite quickly in business headlines. One scarcely
need be a guru to find them. But don’t expect the lucky bosses to be
embarrassed by their companies’ largesse. The more outlandish the
salary, the more the prestige, deserved or not. Merit, fairness, and
stockholder value are not part of the equation. The object is to be the
player who dies with the most toys.
This goal can
sometimes be achieved by getting fired. Stanley O’Neal, dumped by
Merrill Lynch, left with $161 million to soothe his battered ego. Thus
it’s not hard to see why these investment houses may be especially
vulnerable when the economy takes a nasty turn. Even when they finally
do unload one of their barons they have to keep on paying.
Nor do stockholders
have much to say about it. Corporations are not exactly democracies.
There are no elections, no primaries, no referenda, no initiatives to
change leadership or alter the course of events. No chance for
reformers to campaign house-to-house or to run advertisements to throw
the rascals out. Occasionally though, one pack of plutocrats will
organize a proxy battle to wrest control from yet another. Just now
I’ve been watching such a tussle for Hartford’s own Phoenix insurance,
certainly a worthy target. But the insurgent group is just a hedge
fund, probably not a true friend of average shareholders either.
Surely we Americans
are not immune from a little personal greed ourselves, but we do tend to
lose patience when such a human flaw goes institutional. Codgers can
recall in the ‘60s when CEO pay was around 30 times the average
worker’s. In the ‘80s that multiple grew to 70, and in the ‘90s it
reached 100. Now it runs from 200 to 300, with some particularly
avaricious chiefs commanding over $100 million.
Unfortunately shame
is outmoded. Now you grab what you can. And why not? With the economy
and the Arctic ice sheets collapsing, it’s every many for himself. The
alpha males know to take the money and run. Only wimpier leaders try to
make order out of the resulting chaos.
But the ultimate
problem is, what happens when disgusted citizens and investors
eventually pull in their horns. To a degree this has already started.
Consumer confidence has plummeted as Washington bails out the same
investment banks that caused the problem in the first place. Investors
are chary too, now leaning more toward bonds. Congress really needs to
put some limits on CEO pay before even Connecticut recedes to a
second-rate economy.
--
Columnist William A.
Collins is a former state representative and a former mayor of Norwalk,
Connecticut. A photo of Bill Collins is available
CLICK HERE
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