CEO Compensation: Heck of a Job. Take These Millions and Get Out of Here!

Posted by Gwynne Young on September 19, 2008

1 comments | 1664 reads

When I put out the call for articles about performance management, several authors responded with opinions about how best to manage employees. But so far, no one has said anything about executive performance and pay.

But what about it? How do you measure executive performance, particularly that of CEOs? Today, The New York Times editorializes (Bankers and Their Salaries) about CEO compensation in light of the economic crisis. The Times editorial board rightly, in my opinion, argues that when the government bails out financial institutions, those huge salaries and severance packages should not be part of the deal. A CEO should not be rewarded for having steered the ship into the ground.

I think The New York Times doesn't go far enough. What about other businesses? Why is it that when the embattled Home Depot CEO was pushed out, he went with a huge package? "Hey, we hate how you treated shareholders and managed the company. Here, take this huge wad of dough and get out of here."

Why are the top leaders walking away from broken businesses with millions, tens of millions and hundreds of millions?

If we're tying performance to compensation, then doesn't it make sense to say that if you can't run the business, you don't get compensated?

Gwynne Young

Gwynne Young is a former newspaper writer, columnist and copy editor who has managed online content for several companies, including Pets.com and Gartner. She has a master's degree in journalism from Northwestern University’s Medill School of Journalism.

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Andrew Rudin

September 20, 2008

The Big "E" motivates all !

Gwynne: it's odd to attempt to apply logic to our current economic morass, so I'm equally befuddled! It seems like for the rest of us, when we don't produce, we don't walk on a red carpet out the door.

The best answer I could find for your question--albeit a partial one--is that executive compensation packages are ego-driven. When executive pay information became public, the transparency didn't cause a [i]decline[/i] in executive pay, but an [i]escalation[/i]. Why? Because CEO's of major corporations saw what their counterparts received, and demanded more.

They got it--and not because they were worth it, but because they couldn't live with the idea that anyone else might be able to dock a more expensive yacht next to theirs at the marina.

So, recognizing that failure is a possible outcome for any CEO, they probably followed the advice "plan for the end at the beginning."

Their boards were happy to comply.

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