Part of our annual ritual of filling out our tax returns is seeing in black and white how we did last year. We tend to focus on the question of whether we owe money or will get money back - and how much. But there's also that space for how much money we earned. We tend to see the money we make as the measure of who we are and what we accomplished . . . of failed to accomplish.

But one group gets to see a big figure in the income box that bears no relationship to the bad jobs they did. These are the guys with the golden parachutes. So who's floating pretty this year after jumping ship?

No question, US CEOs and officers should have no trouble making ends meet. Occidental Petroleum chairman and chief executive Ray Irani was given more than $400 million for 2006 - "one of the biggest single-year payouts in U.S. corporate history." link

The AFL-CIO has a website dedicted to executive pay, one part of which looks at golden parachutes and handshakes.

Several CEOs departed in 2006 who received generous exit packages despite their poor performance, costing companies and their investors millions of dollars. Pfizer’s Henry McKinnell and Home Depot’s Robert Nardelli received exit packages of more than $200 million each, despite poor stock performance during their tenures.

There's a theory behind all this gold, but as is so often the case with theories that bend the rules toward those with the gold, the theory has not been borne out in reality.

Supporters of such severance agreements argue that they provide managers with the incentive to maximize shareholder wealth without worrying about losing their job as a result of a change in control. However, the amounts guaranteed by golden parachutes and golden handshakes may add up to millions of dollars. When these packages become excessive, they may motivate executives to engage in a merger, even though it may not be in the interests of shareholders. Golden parachutes also may result in lower firm valuation, according to Harvard professor Lucian Bebchuk.

The poster child for a lack of connection between CEO compensation and company performance has to be:

Alan Mulally, president and chief executive officer, served as president and CEO from Sept. 1, 2006 for the remainder of the year, and earned $666,667 in salary. His 2006 compensation totaled $28,183,476. Mr. Mulally received a bonus of $18,500,000 which consisted of a $7,500,000 hiring bonus and $11,000,000 as an offset for forfeited performance and stock option awards at his former employer. The expense for his options and other stock-based awards totaled $8,682,376, and includes cost recognized in 2006 for a $5 million stock option grant that he received in March 2007 as part of his 2007 option grant. Mr. Mulally received other compensation totaling $334,433, which included $172,974 for required use of the corporate aircraft, and $55,469 for relocation costs and temporary housing.

That's a heck of a lot of simollians to one guy for 4 months "work" from a company that is in deep trouble and could put that money to more productive use elsewhere . . . and that is "shedding" workers like old fur when the season changes.

And he's not the only one at Ford who was richly rewarded this past year. link

In fact, these executive severance packages suck up money that could be used for other purposes, including health insurance, pensions and pay raises for the rest of the workers, and lower prices and better products and services for customers. So workers are pressed ever harder, leading to the phenomenon of parking lot childcare, among other travesties of life these days for those who get golden showers instead of gold handshakes.

But within executive culture there is a Lake Wobegon effect that demands that executive pay be set ever above average. Rather than seeing how good an executive you can hire for how little money, the system seems set to push pay ever higher through what purports to be a scientific method of pay setting through "benchmarking" and the like. link

What is truly pathetic is that, having managed to get a big thumb on the scale, these ultra rich execs still aren't satisfied. The big news this past year has been their backdating stock options. The AFL-CIO has put together a website that examines this and other issues affecting executive pay.

As THEY say: Win if you can. Lose if you must. But always cheat.

Oink
Of course, the richest of the rich, according to United for a Fair Economy are the oil executives and defense contractors. No surprise there if you have been sentient during the past year and paid the slightest attention to the news.

UFFE disputes the theory for executive pay setting and the timid measures made to reign it in by SEC requirements for public disclosure:

Executive Excess 2006 also challenges the current reform agenda for addressing excessive CEO pay in oil and defense as well as throughout the American economy. That agenda, reflected in new SEC rules released at the end of July, emphasizes requiring corporate boards to fully disclose all the revenue streams — perks and pensions included — that go into contemporary executive pay.

But disclosure alone, notes report co-author Chuck Collins, won’t restore fairness to the nation’s executive suites.

“Transparency has been ineffective in curtailing CEO pay,” says Collins. “The root problem is an imbalance of power. We need to give more clout to other stakeholders, such as requiring shareholder approval of executive pay and retirement packages, as is now done in Britain.”

Academia
What is more, this trend has infected academia - potentially part of the story behind the increasing expense of higher education. As the subscription-only Chronicle of Higher Education survey of academic salaries noted last year:

The number of chief executives in higher education moving into the highest ranks of compensation accelerated in the past year.

While the salaries do not have the eye-popping quotient of those of corporate CEO's — whose median compensation was just over $6-million among the 350 largest U.S. corporations — the steady upward march of higher-education compensation is increasingly spreading from private institutions to public colleges and universities.

The Chronicle's annual compensation survey covers more institutions this year than ever before, so comparisons are not direct. But the trends are significant nonetheless. A total of 112 presidents of traditional four-year public and private institutions, and systems, had compensation packages totaling at least $500,000. While this survey includes 853 institutions or systems, 17 percent more than last year, the number in that level of compensation increased by 53 percent.

link

So one more issue to add to your generaly sense of aggravation.

• CEOs,
• pay,
• golden-parachutes