Pay for Failure - Board Compensation committees adopt GOP CEO approach

[papau]

You got to love Board awarded stock options -Richard Fairbanks of Capital One Financial Corp. head Richard Fairbanks picks up a $18 million increase because of newly issued stock options, and Bruce Karatz, CEO of builder KB Home Inc., takes down $118 million in cashed-out stock options! :-)

So when do all boards move to restricted stock and long-term incentive payouts bncause of the critism of excessive CEO pay, excessive even on those rare occassions when it is tied to performance? Recent surveys on CEO pay have one finding that more than one in four companies granted their CEOs raises of at least 25%, according to a survey of nearly 200 large firms by compensation analyst Equilar Inc. Still other surveys highlight the fact that the US has the highest paid CEOs in the world (see Mercer: US Exec Salaries Lead the Globe http://www.mercerhr.com/globalpaysummary). According to the Equilar survey, major companies that awarded their CEOs pay raises of between 25% and 50% averaged total shareholder return of 7.4%.

At the 11 companies in the study, Pay for Failure: The Compensation Committees Responsible, The Corporate Library found that compensation committees authorized a total of $865 million in pay to CEOs who presided over an aggregate loss of $640 billion in shareholder value. The 11 companies are some of the biggest household names in Corporate America. They are:

AT&T Inc. (T)

BellSouth Corporation (BLS)

Hewlett-Packard Company (HPQ)

Home Depot, Inc. (The) (HD)

Lucent Technologies Inc. (LU)

Merck & Co., Inc. (MRK)

Pfizer Inc. (PFE)

Safeway Inc. (SWY)

Time Warner Inc. (TWX)

Verizon Communications Inc. (VZ)

Wal-Mart Stores, Inc. (WMT)


http://www.thecorporatelibrary.com/tcl-store/PressReleases/865mm_in_ceo_compensation_while.htm

Pay for Failure: The Compensation Committees Responsible

According to another survey of more than 550 companies by The Corporate Library, a Maine-based governance firm, while the salaries that companies pay their chief executives have been met with increasing condemnation by many institutional investors and others in recent years, that did not stop CEO pay from climbing last year a median of 11.3% in 2005, with wages for CEOs at the largest firms rising 3.7% to a median of $5.2 million.

According to the governance firm's research, one example of executive pay not being tied to corporate performance is AT&T's chief Edward Whitacre, who was paid $17.1 million last year, a 15% increase. The raise brought his total pay over the past five years to more than $85 million, despite the fact that shareholder return - the potential gain to investors who own its stock - is down 40% over that period, according to analysis by The Corporate Library.

Even if companies have lagged in their efforts to rein in executive compensation, they will be forced to be more forthcoming, with Securities & Exchange Commission requirement to take effect next year that will compel more disclosure of executive pay packages (Web statement is at SEC Unveils Proposed Exec. Comp. Disclosures Mandate http://www.sec.gov/news/press/2006-10.htm, Cox Statement is at http://www.sec.gov/news/speech/spch011706cc.htm).