Executive Pay Keeps Rising, Despite Outcry
The public furor that prompted Dick Grasso's forced departure from the New York Stock Exchange in September drove home a stark point to corporate managers: Even a well-regarded chief executive officer can be sacked largely because he made too much money.
The incident aggravated the ongoing tug of war between investors and management over how much CEOs should be paid. Surprisingly, despite all the negative publicity, many big-business bosses continue to win this battle as they find new forms of compensation to make up for more modest salary increases and bonuses paid during the economic downturn.
CEOs' total direct compensation at major U.S. corporations jumped 15% to a median of $3,022,505 in 2002, according to a proxy analysis done for The Wall Street Journal by Mercer Human Resource Consulting. And compensation is expected to rise again this year, say pay consultants and attorneys who negotiate CEO contracts. Big-business bosses will benefit from a number of factors, including the economic recovery, rising share prices, fatter dividends and falling taxes.
Indeed, an early look at 2003 pay deals shows how corporate titans keep piling up the dough. The median cash bonus rose 26% to $605,000 for the heads of 69 big companies whose fiscal year ended between Jan. 1 and June 30, while the 17 of those chiefs with restricted-share grants saw the grants' median value soar 73% to $2.31 million, according to a proxy analysis set for release next week by pay consultants Equilar Inc. of San Mateo, Calif.
"CEO pay remains a wasteland that has not been reformed," contends Patrick McGurn, a senior vice president at Institutional Shareholder Services, a proxy-advisory firm in Rockville, Md.
Investors increasingly are questioning lavish compensation granted not only to weak performers but also successful CEOs.
More board members will be targets for pay squabbles -- and some may lose their seats, predicts Richard H. Koppes, a director of two public companies and former general counsel of the California Public Employees' Retirement System.
Sensitive to potential outcry, some CEOs have moderated their cash compensation -- while still amassing a huge pile of stock options. John Chambers, president and CEO of Cisco Systems Inc. in San Jose, Calif., has earned a $1 annual salary since April 2001, according to the company proxy statement released last month. And for the third year in a row, he spurned a bonus, "despite all the corporate and individual goals for the year having been met," the proxy statement says.
Yet Cisco directors granted Mr. Chambers four million options, which could be valued as much as $85.68 million, depending on the stock's future value. The CEO already holds 27.8 million exercisable options -- valued at $196.5 million at July 26, the end of its fiscal year. The latest option grants reflect "his performance and leadership with Cisco and placed a significant portion of his total compensation at risk," the proxy says.
"The compensation doesn't make a lot of sense," says Charles Elson , head of the University of Delaware business school's Weinberg Center for Corporate Governance. Mr. Chambers "has all his wealth tied up in the company. Why does he need four million more options?"
A Cisco spokeswoman says all Cisco staffers get stock options, which the company views "as a long-term, performance-based, high-risk compensation method." She notes that Mr. Chambers hasn't exercised options since February 2000.
Mr. Elson partly blames Carol Bartz, the Autodesk Inc. CEO who runs the Cisco board's compensation committee. The committee's generosity "doesn't hurt the argument she could make to her own compensation committee" for enlarged pay, he suggests. "There's a lot of potential self-interest there." Ms. Bartz declines to comment, according to the San Rafael, Calif., software maker.
There is another reason CEOs often win the pay tug-of-war: Businesses keen for fresh leadership still pay plenty to land a strong outsider. "I don't see a significant decrease in the size of the numbers in the typical package" for a newly recruited CEO, says Donald Delves, president of Delves Group, Chicago pay consultants.
One such example is John D. Finnegan, who took command last December of Chubb Corp., a property-casualty insurer in Warren, N.J. Mr. Finnegan, now 54, had led General Motors Corp.'s finance unit since 1999. Chubb enticed him with an attractive package that included a $1.2 million salary, as much as $3 million in annual bonuses, 620,647 stock options and 61,617 restricted shares worth $3.2 million at the end of 2002.
The restricted shares lack performance strings. Limits on selling them start to lapse Dec. 1 and fully disappear a year later. "He just has to stay there to get the shares," Mr. Delves observes. Mr. Finnegan also won "a very sizable option package," the consultant adds, although more than a third of his options are "premium priced." Chubb's share price must climb substantially before Mr. Finnegan makes money exercising those options.
Chubb officials say the restricted shares and most of the options helped to replace rewards that Mr. Finnegan gave up at GM, where he spent 26 years and amassed substantial wealth. "Why would anyone leave and throw away millions and millions of dollars?" asks spokesman Mark Greenberg. Mr. Finnegan "wanted to be made whole," but didn't make that a condition of the Chubb deal, another person familiar with the situation recalls.
Retention worries exert an equally strong upward pull on CEO remuneration. In August, Nextel Communications Inc. signed a generous new employment agreement with its president and CEO, Tim Donahue. He joined the Reston, Va., telecommunications concern in 1996 as president and chief operating officer, advancing to CEO in 1999.
Nextel lifted his base salary by about 43% to $1 million from $700,000. Among other things, the company also sweetened his severance benefits, such as by agreeing to pay his salary for two years rather than one after he leaves.
Corporate Library, a research group in Portland, Maine, that studies corporate governance, was critical of Mr. Donahue's new package. "We've gone from good practice in terms of severance and a moderate base salary to bad practice in terms of a more typical severance package ... and a much higher base salary,'' says Paul Hodgson, senior research associate for the group.
Nextel spokeswoman Audrey Schaefer says the board's pay panel decided Mr. Donahue is a successful leader who "fully deserves the compensation package that they've developed.'' She notes that his enhanced severance includes tougher restrictions on his ability to work for a competitor or hire away staffers. Also, she adds, large institutional investors were "extremely positive" about his three-year contract.
Oddly, corporate boards sometimes fork over bigger bucks because they don't want to alarm investors that a poorly performing leader is headed out the door. "I've told boards to pay CEOs more than justified by performance because the board told me they hadn't made up their minds whether he should go or stay," concedes Alan Johnson, managing director of Johnson & Associates, New York pay consultants.
That rationale appears to have influenced Motorola Inc. directors. Christopher Galvin, chairman, CEO and grandson of the founder, garnered a $1.5 million bonus during 2002 after being paid none in 2001. His salary stayed flat at $1.275 million for the third consecutive year during 2002, a year in which Motorola returned to profitability but its stock price continued to plummet.
The official justification for the big bonus? "The company exceeded the vast majority of the financial metrics that it set out to achieve in 2002," says the latest proxy for the Schaumburg, Ill., maker of telecom equipment and semiconductors. Mr. Galvin's bonus "is solely based on targets," says spokeswoman Jennifer Weyrauch.
Privately, however, Motorola directors felt that as long as Mr. Galvin held the No. 1 spot, he should "be paid commensurate with CEOs of major corporations," an informed individual says. "The guy either has got the job or he doesn't."
At Motorola's May annual meeting, several angry shareholders stood to denounce Mr. Galvin's compensation amid a depressed share price and extensive layoffs. Directors subsequently lost confidence in him. Last month, the 53-year-old executive agreed to resign.
The Galvin pay protests exemplify growing investor activism. Shareholders of 17 companies voted on proposals this year urging investor approval for rich "golden parachutes," exit-pay plans that boards often promise chiefs before they prove their worth. The resolutions won a majority of votes cast at 13 companies, representing "an extraordinary level of support," says Carol Bowie, director of governance research services at the Investor Responsibility Research Center in Washington.
Many top executives think they are "so indispensable that they need outsized compensation," argues Phil Angelides, the California state treasurer and an organizer of the unprecedented public pension-fund campaign to remove the NYSE's Mr. Grasso. Will outraged institutional investors now try to topple an overpaid head of a public company? "We might," Mr. Angelides warns.
美国企业CEO薪酬持续攀升引发强烈争议
公众的愤怒情绪促成纽约证交所(New York Stock Exchange)董事长迪克?格拉索(Dick Grasso)9月份被迫辞职，这一事实向企业管理人士发出了一个明确无误的信号：即使是极受尊敬的企业高管人士，亦可能会因薪酬过高而遭罢免。
这一事件导致投资者和企业管理层之间关于高管人士合理薪酬水平展开的争论更加激烈。不可思议的是，尽管来自公众方面的反对意见如潮，但许多大企业的高管人士继续赢得这场较量的胜利，他们找到新的方式补偿经济低迷时期获得的相对微薄的加薪和奖金。
美世咨询(Mercer Human Resource Consulting)接受《华尔街日报》(Wall Street Journal)委托所作的一篇分析文章显示，2002年美国大公司高管人士直接薪酬总额跃升15%，中值达到3,022,505美元。而负责高管人士薪酬合约谈判工作的薪酬顾问和律师则预计，今年的薪酬水平还将上升。大型企业的高管人士将因诸多因素而从中受益，包括：经济复苏、股价上涨、股息增加及税赋负担下降。
确实，从企业高管人士2003年初的薪酬协议可以看出，高管人士如何继续其敛财游戏。据加州圣马特奥薪酬顾问公司Equilar Inc.接受委托所撰写的、将于下周发表的一篇分析文章，69家大公司（这些公司财政年度的截止日期在1月1日至6月30日之间）高管人士的平均现金奖金上升26%，达到605,000美元；在其中17名被赠与限制股股票的管理人员中，其被赠与股票的平均市值飙升73%，达到231万美元。
马里兰州罗克维尔代理顾问公司Institutional Shareholder Services的高级副总裁Patrick McGurn声称，高管人士的薪酬问题目前仍像一块尚未得到妥善治理的荒野。
投资者们对于向高管人士提供丰厚补偿的做法提出越来越多的质疑，其中不仅包括向业绩不佳的高管人士、而且还包括向业绩不菲的高管人士提供丰厚补偿的做法。
身兼两家上市公司董事之职、加州公务员退休基金(California Public Employees' Retirement System)前法律总顾问Richard H. Koppes预计，更多的董事将会成为高管人士薪酬之争中的众矢之的，一些董事可能会因此而失去他们的职位。
根据思科系统公司(Cisco Systems Inc.)上个月公布的公司代理声明，公司总裁兼首席执行长约翰?钱伯斯(John Chambers)自从2001年4月以来年薪就只有1美元。这份代理声明称，“尽管当年的公司及他个人全部的业绩目标都已实现，”他还是连续第三年放弃了奖金。
不过思科系统的董事给予了钱伯斯400万股股票期权，其价值可能高达8,568万美元，这完全取决于思科未来的股价。这位CEO可执行的期权有2,780万股，到该公司本财年截止日6月26日，这些期权的价值为1.965亿美元。
代理声明称，给钱伯斯的最近这笔期权反映了“他在思科的表现和领导力，并使其整个薪酬的重要一部分面临风险。”
特拉华大学(University of Delaware)商学院温博公司治理中心(Weinberg Center for Corporate Governance)的主任查尔斯?埃尔森(Charles Elson)称，“那些薪酬意义不大，（钱伯斯）在该公司已积累了他全部的财富。为什么他还要增加400万股期权呢？”
思科的发言人称，所有的思科员工均持有股权期权，公司认为“这是一种长远的、基于业绩表现的而且高风险的薪酬方式。”她表示，钱伯斯2000年2月以来就没有执行过期权。
埃尔森认为思科董事会薪酬委员会的主席、Autodesk Inc.的CEO凯洛?巴特兹(Carol Bartz)要为此承担部分责任。这个委员会的慷慨“并不会影响到她自己的薪酬委员会（增加其薪酬）可能的理由。这其中有很多潜在的自我利益在里面。”巴特兹拒绝置评。
CEO们往往能赢得薪酬之争的另外一个原因是：急需新领导人的公司依然为找到一个强有力的外部人士而支付大笔薪酬。薪酬咨询公司Delves Group的总裁唐纳德?得尔弗斯(Donald Delves)说，“（对于一个新聘CEO来说）传统薪酬方案的数额并没有明显下降。”
约翰?芬尼根(John D. Finnegan)就是这样一个例子，他去年12月接手领导财产－伤害保险商Chubb Corp.。现年54岁的芬尼根从1999年到去年领导的是通用汽车公司(General Motors Corp.)的金融子公司。Chubb给他提供了一个诱人的薪酬方案，其中包括120万美元的工资，300万美元的年度奖金，620,647股股票期权以及在2002年年底价值320万美元的61,617股抛售时机受限的股票。
这笔抛售时机受限的股票不取决于芬尼根工作表现。他只是不能在12月1日开始的一年之内抛售这笔股票，而一年很快就过去了。得尔弗斯说，“他无需任何努力就能得到这笔股票。”
Chubb的管理人士称，这些抛售时机受限的股票和多数期权是用来补偿芬尼根所放弃的GM的福利，他在那工作了26年并积累了大笔财富。公司发言人Mark Greenberg称，“为什么一个人要放弃数百万美元的福利离开原来的公司呢？”
摩托罗拉公司(Motorola Inc.)的董事长兼CEO、公司创始人的孙子克里斯托弗?高尔文(Christopher B. Galvin)2002年得到150万美元奖金，而2001年则分文未取。2002年，他的工资依然是127.5万美元，连续三年没变，这一年摩托罗拉恢复了盈利，但股价仍在继续下跌。
那公司开出这笔奖金的理由是什么呢？这家电信设备和半导体制造商在最近的代理声明中称，“公司已超额完成了2002年绝大多数的财务指标，”公司发言人Jennifer Weyrauch称，“（高尔文的奖金）仅仅基于这些业绩目标。”
但摩托罗拉的董事会私下里感到，只要高尔文还在一把手的位置，他的薪酬水平应该和其他大公司的CEO相一致。
在摩托罗拉5月份的股东大会上，几个愤怒的股东站起来指责高尔文在股价低迷和公司不断裁员的情况下还拿那么高的薪水。之后，董事们也对他丧失了信心。上月，53岁的高尔文同意辞职。
加利福尼亚州司库Phil Angelides说，很多高层管理人士认为他们是不可或缺的，因此应该得到超级薪酬。Angelides是该州公共养老基金发动迫使格拉索下台运动的组织者。愤怒的机构投资者是否会设法让一家上市公司拿钱太多的领导人下台？Angelides说：“是的，我们可能就会。”
