Tag: Executive Compensation

Awakening the directors within

With the ouster of Home Depot‘s Bob Nardelli and his resultant compensation package that was valued at about $210 million and Pfizer‘s Henry A. McKinnell’s which came to almost $200 million, it has brought the spotlight on excessive compensation packages for CEO’s.

So far this year it looks like it may become the biggest issue at the annual meetings of public companies. According to Donald Delves, a Chicago-based compensation consultant one positive outcome of all of this is that “There’s a sort of silver lining to the whole Nardelli, Home Depot thing. At least the shareholders finally spoke up.” (managersrealm.com)

Two thoughts:
1. It’s about time!
2. And what of the Directors who represent the interests of shareholders?

Home Depot or Lowe’s?

[F]or any of those who still believe that pay has any relationship to performance, check out (Home Depot‘s ex-CEO) Nardelli’s pay relative to that of Robert Niblock’s at Lowe’s.

Over the last three years, Nardelli’s base salary, bonus, and other compensation (loan forgiveness) totaled $37.4 million – more than quadruple the $8.1 million that Niblock got! The picture gets a lot worse when you add in grants of restricted stock and options.

Over the last three years, Nardelli got almost $40 million in restricted stock, and over 1.7 million options. Niblock got $9.4 million in restricted stock and 272,000 options. (…)

[The] new Home Depot CEO Frank Blake has a radically different compensation structure than his predecessor. He may earn up to $8.9 million this year, but a hefty portion of that is at risk, and he has no severance package. (Money)

Director pay up 12%

Average board-member compensation climbed about 12 percent in 2006, to a mean of $160,439, according to a new study from Institutional Shareholder Services. Median pay increased 10.5 percent, to $143,123.

The increase was driven by a 16 percent rise in the value of equity-based compensation, according to the ISS, while the cash portion of a typical pay package rose just 5.2 percent. The study also observed, however, that stock options have a diminishing role in director compensation. (CFO.com)

CEO earns 821 times more

Back-to-back results published by the Economic Policy Institute that show that

“In 2005, an average Chief Executive Officer (CEO) was paid 821 times as much as a minimum wage earner, who earns just $5.15 per hour. An average CEO earns more before lunchtime on the very first day of work in the year than a minimum wage worker earns all year.” (link)

And that

“In 2005, the average CEO in the United States earned 262 times the pay of the average worker, the second-highest level of this ratio in the 40 years for which there are data. In 2005, a CEO earned more in one workday (there are 260 in a year) than an average worker earned in 52 weeks.” (link)

Around the same time, a report by a CEO organization assures us that CEO pay is “very reasonable”.