Sunday, January 09, 2005

Executive Enrichment Rescrutinized

It's literally hitting the headlines once more. This weeks Sunday Times Business section profiled the ludicrous retirement & compensation packages the top execs at S + P 500 companies are leaving with. Comprised of severance packages, deferred compensation (how NYSE's Dick Grasso made his cool 140M), bonuses, stock options, and pension payments (not to mention the nonmonetary perks), the golden parachutes top exces like Bank of America's Chad Gifford are flying away with are testing the patitence of investors and media alike.

The question isn't whether severance packages should exist--I'm a firm believer that a lifetime's work should be duly rewarded in the afterlife (65 and onward). But why, as the Times article reports, do those incentivized schemes have to be so bloated? More often than not, its the insiders who reap the gains (throught option grants & insider trading) while the Average Joes have little to fall back on except Yahoo Finance. What needs to happen is twofold: One, shed more light in how management is paid and fill in shareholders. Heck, maybe shareholders should start voting on the issue. Two, reward management if and only if shareholder value has moved in tandem with previously made promises.

Let's level here--executive enrichment is by no means a new phenomenon. In the eighties (I just rewatched Barbarians at the Gate), top brass made millions as they thwarted off corporate raiders interested in quick buyouts. In the 90's, tech M&A transformed the recent Stanford PhD into billionares. Today, scandals plague the corporate environment and the only way it's dealt with are golden parachutes, vague defenses from PR staff, and sudden CEO resignations.

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