Banks: Clawing Back CEO Compensation

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  1

  RickSchultz

  01/16/08 | Report as spam

  So very wrong...

  Completely disagree. Those parachutes were negotiated before these guys got on the plane. If you want to take the cash from someone, take it from the lackwits who signed off on the parachutes in the first place. Honestly, there may be 10 people on the planet who qualify as worthy of that kind of "signing bonus".
  
  Let's lay blame where it belongs; with the people who incent their management teams to create fictions & sell them as facts. The shareholders don't complain when the company generates unrealistic profits, so they shouldn't complain when those unrealistic products result in unrealistic failures.
  
  And, please...let's not legislate this thing like we did with Worldcom & SOX. There's more than enough legislation out there; just a serious dearth of common sense.

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  Bebedo

  01/17/08 | Report as spam

  Pay for Performance

  Arguing that common sense should hold sway rather than laws is like saying we don't need homicide laws because everyone knows you should not kill. Laws are created due to need; SOX came about after Enron, Tyco and others abused systems that relied on something more than common sense, though less that mandated accountability.
  The normal public is not privy to the Board of Directors' discussions, nor their motivations. You cannot expect oversight where details are private and undisclosed. But you can level the playing field and create a fair environment. Would you perform better at your job knowing your $50 million golden parachute would be in jeopardy if the stock slid by X%?
  And let's not cry for these folks -- with a salary, bonuses, stock options, individual privileges, spending accounts, golden parachutes and more, it's not like they are not being rewarded for their positions.

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  3

  natallen

  01/16/08 | Report as spam

  RE: Banks: Clawing Back CEO Compensation

  Its amazing to see these "exit" payouts!! At the end of the day we have to ask ourselves - What drives these CEO's to perform?? Succeed or fail they are rewarded with hefty payouts!

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  4

  Wm. T.

  01/18/08 | Report as spam

  RE: Banks: Clawing Back CEO Compensation

  "So how can these boards justify the rich exit packages?"
  
  Why is the question rhetorical? You're the expert. Tell us.
  
  I think Karl Marx had a few ideas on the subject 150 years ago.

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  5

  bholstein

  01/22/08 | Report as spam

  CEO Compensation--Why It Got Out of Control

  The answers are complex but let me try to boil it down: there were three sets of players, CEOs themselves, their boards and compensation committees, and then the compensation consultants. One would have thought that checks and balances would have been in place. But over the years, all the players found common cause in dramatic increases in CEO compensation. The consultants made money. The compensation committees were mostly in the dark. CEOs got richer.
  
  One other factor that explains these large exit packages is that most CEOs and their boards structure the compensation so that it is backloaded, meaning it comes at the end of the CEO's term. One reason for this practice is that reduces the annual compensation while the CEO is serving, thereby reducing scrutiny and agita.
  
  Bill Holstein

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  Robert Avila

  02/21/08 | Report as spam

  Executive incentives

  There has been a significant structural change in the US economy over the last 25 years which few people have recognized. In the early 1980s before the Reagan and Bush tax cuts US corporate executives were paid 42 times as much as their average employee. Today, thoroughly incentivized by our now nearly flat tax structure, these executives succeed in taking home more than 420 times their employees? pay, many times more than their peers elsewhere in the industrialized world. In that earlier pre tax cut period corporate executives were stewards acting on behalf of the long run interest of their institutions. Boards of directors did not have to be heavily involved because the high tax rate greatly reduced the incentives of senior executives as agents for the shareholders to enrich themselves at investors expense. Other legislation in the 1970's shifted the interests of institutional investors from supporting management to supporting corporate raiders offering a higher price for the stock. As a result corporate executives lost the security they once had to take the long view and became focused on quarterly earnings. Thus corporate executives now face the carrot of being able to take home as much wealth as they can extract from their corporation and the stick that threatens them with near term job loss if things don't go well quarter to quarter which encourages them to take whatever they can as quickly as they can. This is not to say that corporate executives are crooks but only that they are human beings whose economic incentives have changed and thus we should not be surprised to see that their behavior has changed from being stewards to acting more like ancient Roman governors. To ask boards of directors to rein them in is like asking the Roman Senate to rein in Pompey and Caesar.