While many U.S. companies are under scrutiny by their shareholders for excessive CEO compensation, a new report targets the companies it calls the 12 “worst offenders” of the so-called “pay for failure” for bosses.
CEOs at these companies have all received total pay of more than $15 million over the last two years, according to the research firm The Corporate Library. At the same time, the companies’ shareholder returns have fallen over the last five years and performance against peers slumped during the same period, the report states.
According to Paul Hodgson, The Corporate Library’s senior research associate and author of the report, “It continues to be the case that far too much executive compensation is delivered without any link to performance at all. Within the current examples, executives are showered with golden hellos, golden good-byes, excessive retirement benefits and perquisites for which they are quite able to pay themselves.”
The companies on the list are Home Depot Inc., Pfizer Inc., Time Warner Inc., Verizon Communications Inc., Wal-Mart Stores Inc., Dell, Eli Lilly, Affiliated Computer Services Inc., Ford, Abbott Laboratories Inc., Qwest Communications International Inc. and Wyeth.
The study does note the recent share price recoveries of Abbott, Qwest and Wyeth and the new employment agreement for Home Depot CEO Francis Blake.
But how much of a share recovery? The report lists Qwest CEO Dick Notebaert as getting $44.5 million of compensation in the past two fiscal years, while the shareholder return since 2001 is minus-40.8 percent.
Ford paid its new CEO, Alan Mulally, and his predecessor, William Clay Ford Jr., a total of $27 million over the past two years, according to the report, while Ford shares have tumbled 41 percent in the past five years. A Ford spokesman said most of Mulally’s 2006 compensation, $18.5 million, was what the carmaker paid to recruit him.
According to a Detroit Free Press analysis, executives at the top U.S.-based automakers and suppliers received compensation packages worth an average of $4.2 million in 2006, a year in which two-thirds of their companies failed to post profits. Ford executives accounted for six of the top 15 spots in the rankings, which looked at 80 executives for 14 publicly traded companies.
Last year, the Securities and Exchange commission enacted rules intended to make it easier for investors to understand and restrain compensation packages given to top company officials. Good luck with that.
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