When it was announced last week that Home Depot chief Frank Blake would forgo his $1.2 million cash bonus for 2008, many in Atlanta’s business community couldn’t help but reflect on our very own poster child for the excessively compensated executive, Blake’s predecessor, Robert Nardelli.
Nardelli’s $32 million pay in his last year paled in comparison to his $210 million severance package.
You have to really want somebody to leave to pay that kind of walk-away money. But, from what I’ve heard, it was worth every penny.
Executive pay once again dominates the headlines. But executive pay was out of hand long before the financial meltdown.
Like the spoiled children you encounter in the grocery store, it’s not so much their fault as it is the person pushing the cart.
In this case, the board of directors.
John Bogle, founder of Vanguard and a tough-as-nails critic of the lack of corporate governance, took on the overindulged executives in his 2005 book, “The Battle for the Soul of Capitalism.” He showed that in 1980, the average CEO earned 42 times the average worker. By 2004, that had risen to 280 times.
Corporate profits grew at an average annual pace of only 2.9 percent during that time. So any way you slice it, the CEOs didn’t earn such a jump in pay.
Some say the explosion in executive pay was lit by the act of trying to limit it. In the 1990s, Congress capped the corporate tax deductibility for executive salaries in excess of $1 million.
Quicker than you can say stock options, those and other ingenious payouts led to an explosion in compensation packages. It also led to risky, short-term business strategies because the stock price was all that mattered.
While we may wish for some saintly regulator to swoop in and right all we think is wrong, we should be mindful of who assumes that duty in reality —- Congress.
If its work in the 1990s weren’t disqualification enough, surely its recent escapades are.
The House’s move to tax AIG’s bonuses was so unconstitutional as to be laughable, if it weren’t for the revelation they not only don’t read the bills they are voting on but haven’t read the Constitution (see Article 1, Section 9, Paragraph 3).
But if boards of directors aren’t up to the task, then government seems more than willing to do it for them.
Home Depot learned the hard way. The Nardelli flap embarrassed its board, employees, founders and Atlanta.
Blake’s total compensation for 2008 was $9.2 million, somewhere just above the median point in The Wall Street Journal’s current survey of CEO pay.
Still, $9.2 million is a long way from the Nardelli norm ($30 million average the last three years).
It should be noted that only three directors remain on Home Depot’s board from that period.
source: Atlanta Journal Constitution
Nardelli’s $32 million pay in his last year paled in comparison to his $210 million severance package.
You have to really want somebody to leave to pay that kind of walk-away money. But, from what I’ve heard, it was worth every penny.
Executive pay once again dominates the headlines. But executive pay was out of hand long before the financial meltdown.
Like the spoiled children you encounter in the grocery store, it’s not so much their fault as it is the person pushing the cart.
In this case, the board of directors.
John Bogle, founder of Vanguard and a tough-as-nails critic of the lack of corporate governance, took on the overindulged executives in his 2005 book, “The Battle for the Soul of Capitalism.” He showed that in 1980, the average CEO earned 42 times the average worker. By 2004, that had risen to 280 times.
Corporate profits grew at an average annual pace of only 2.9 percent during that time. So any way you slice it, the CEOs didn’t earn such a jump in pay.
Some say the explosion in executive pay was lit by the act of trying to limit it. In the 1990s, Congress capped the corporate tax deductibility for executive salaries in excess of $1 million.
Quicker than you can say stock options, those and other ingenious payouts led to an explosion in compensation packages. It also led to risky, short-term business strategies because the stock price was all that mattered.
While we may wish for some saintly regulator to swoop in and right all we think is wrong, we should be mindful of who assumes that duty in reality —- Congress.
If its work in the 1990s weren’t disqualification enough, surely its recent escapades are.
The House’s move to tax AIG’s bonuses was so unconstitutional as to be laughable, if it weren’t for the revelation they not only don’t read the bills they are voting on but haven’t read the Constitution (see Article 1, Section 9, Paragraph 3).
But if boards of directors aren’t up to the task, then government seems more than willing to do it for them.
Home Depot learned the hard way. The Nardelli flap embarrassed its board, employees, founders and Atlanta.
Blake’s total compensation for 2008 was $9.2 million, somewhere just above the median point in The Wall Street Journal’s current survey of CEO pay.
Still, $9.2 million is a long way from the Nardelli norm ($30 million average the last three years).
It should be noted that only three directors remain on Home Depot’s board from that period.
source: Atlanta Journal Constitution
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