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Thursday, 20 April 2006 |
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Over the past five years, 11 CEOs have been rewarded with a total compensation of $865 million, while their companies lost a total of $640 billion in shareholder value. Yikes. This news comes to us from the folks at The Corporate Library, a corporate governance watchdog group. They've just released a study on executive incentive compensation practices and the gap between pay and performance. The 11 companies in question are:
• AT&T • BellSouth • Hewlett-Packard • Home Depot (NYSE: HD - News) • Lucent Technologies (NYSE: LU - News) • Merck (NYSE: MRK - News) • Pfizer • Safeway • Time Warner (NYSE: TWX - News) • Verizon Communications (NYSE: VZ - News) • Wal-Mart (NYSE: WMT - News) Here's what the companies have in common: • Each received a high-risk rating from The Corporate Library. • Each paid its CEO more than $15 million in the last two available fiscal years. • Each had a negative return to stockholders over the last five years. • Each underperformed its peers over the same period. The Corporate Library had this to say about its findings: "The study examines in detail the incentive policies at each of the 11 companies; finding high proportions of fixed pay, poorly chosen performance metrics, and rewards for below-median performance." Berkshire Hathaway's (NYSE: BRK-A - News) Warren Buffett has frequently criticized executive overcompensation. In his most recent letter to shareholders, he said: "Too often, executive compensation in the U.S. is ridiculously out of line with performance. That won't change, moreover, because the deck is stacked against investors when it comes to the CEO's pay. The upshot is that a mediocre-or-worse CEO -- aided by his handpicked VP of human relations and a consultant from the ever-accommodating firm of Ratchet, Ratchet, and Bingo -- all too often receives gobs of money from an ill-designed compensation arrangement." |
