This could inspire some effective retaliatory fire in the class war
Option Pie: Overeating Is a Health Hazard
By GRETCHEN MORGENSON
THE escalating excess that passes for everyday pay among corporate executives in America has long been justified this way: If they are not paid huge amounts, they will go to greener pastures. Investors will lose.
But a new and comprehensive academic study shows, once and for all, that increases in executive pay, on average, do not translate into later gains for shareholders. Not in the next year, not in three years, not in five.
Joseph R. Blasi and Douglas L. Kruse, professors at the Rutgers University School of Management and Labor Relations, analyzed executive compensation at more than 1,500 American companies from 1992 to 2002. They wanted to determine whether increases in executive compensation, particularly stock options, predicted share returns.
Using company filings, the professors analyzed some 16,500 corporate board decisions on pay over those years. Compensation of 7,500 top executives over the last decade totaled $177 billion; almost $100 billion of that came from options and restricted stock grants.
The study found that a 1 percent increase in total compensation for each of the top five executives at companies predicted a 0.22 percent decrease in average shareholder return over the next year and a 0.12 percent decline over three years. The effect over five years was statistically insignificant.
Is C.E.O. Pay Up or Down? Both.
By PATRICK McGEEHAN
Published: April 4, 2004
THE message from corporate directors to shareholders who are fuming about elephantine executive pay is: We're working on it. The response they get back may very well be: Thanks, but this is not quite what we had in mind.
On paper, the days of rapidly rising executive compensation appear to be ending. Many excesses of the 1990's have been wrung out, and the chances that chief executives will reap hundreds of millions of dollars from cashing in stock options have diminished.
For Directors, Great Expectations (and More Pay)
By ERIC DASH
GOODBYE to golf games and clubby cocktail parties - or many of them, anyway. Hello to weekend work sessions, piles of paperwork and parsing of arcane accounting rules.
That is the new reality for corporate directors like Betsy S. Atkins, chief executive and owner of Baja L.L.C., a venture capital firm in Miami and a board member of three technology companies. These days, she says, board strategy sessions run into early evening. Her workload as a director has tripled, and the time she spends in audit and compensation committee meetings has increased even more. She needs four of her employees - including two accountants and a market researcher - to help manage the burden.
"This is not your grandfather's board, where people just showed up and voted," she said. Board-related business, she added, typically fills about four workdays a month per company, but in a crisis one company can take more than half her time. Demands on directors have intensified in the post- Enron era, and a new risk-reward calculus has emerged, specialists in corporate governance say. A directorship still carries a handsome paycheck and the cachet to help an executive's career. But since the Sarbanes-Oxley Act of 2002 set new requirements for directors, the work also entails more time and effort - not to mention the risk of litigation and a besmirched reputation if something goes wrong. Far fewer people are willing to assume all this.
Largely in recognition of the extra time, compensation specialists say, pay packages for directors are rising. Last year, total compensation for the average director ranged from $43,000 at small companies to $155,000 at the largest 200 concerns - and it is expected to rise at least 15 percent in 2004, said Edward Archer, a compensation consultant at Pearl Meyer & Partners.
