Tuesday, February 26, 2008

CEO Remuneration: Too Much

The pattern of CEO failures being rewarded with huge severance packages is repeated over and over again. The latest is insurance broker Marsh & McLennan who fired its CEO after the company shares lost over a fifth of their value last year. Still he received $7.15 million in severance. The evidence is contrary to the argument that executive talent is so rare that it must be promised a golden parachute to accept new employment.
Yahoo’s CEO received $429 million in stock option profits over his first four years at the helm and a $71 million paycheck in his fifth year. In 2007 he was fired for poor performance.
These absurd rewards for failure are in sharp contrast to the payouts to workers left behind. Mitt Romney’s Bain Capital bought a Tiffin, Ohio, plant and closed it last December denying workers any severance or medical coverage. Bain on the other hand, made $51 million on the deal. The cooperation of the CEO no doubt earned him a tidy sum.
Gardner and Means years ago noted the separation of ownership and management in the modern corporation. They would be shocked to see how it has turned out as boards of directors (many of which are corporate CEOs in other companies) take care of their own at stockholders and employees expense.
Source: Too Much: A Commentary on Excess & Inequality--http://www.cipa-apex.org/toomuch/index.html

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