Today's the day to count your blessings.
And if you're the chief exec of a major American corporation, you'll probably
want to sit down. That count could take a while.
We learned the other day, for example, that John Mack, CEO of brokerage Morgan
Stanley, will receive a bonus of $11.5 million for all his hard work this year.
Never mind that he's only been on the job for five months.
At Goldman Sachs, meanwhile, CEO Henry Paulson will pocket a bonus this year
of about $38 million. This will help compensate for the mere $30 million he
received last year.
CEO pay continues to soar, wildly outpacing the salaries of rank-and-file workers.
That probably won't stop anytime soon, but legislation in Congress might at
least make companies more accountable for fat compensation packages lavished
on the boss.
The Protection Against Executive Compensation Abuse Act -- HR 4291 -- would
require companies to spell out clearly what their top execs are making (including
pensions, golden parachutes and other perks). Such disclosure would have to
be made in an annual report to shareholders.
The report also would have to include all "short- and long-term performance
measures" that will be used to determine future CEO pay. Shareholders would
be able to reject any performance measures deemed inappropriate or inadequate.
It's amazing that CEO pay is so obscene and so opaque that legislation is necessary
to make companies come clean about how much their top guys (and it's almost
always a guy) are pulling down.
"Transparency is a big problem," said Paul Hodgson, senior research
associate at the Corporate Library, a research firm specializing in corporate
governance. "Disclosure levels in the United States are not as good as
in other parts of the world."
For instance, it was reported last week that some companies actually pay the
personal taxes of their CEOs as part of compensation packages. But you wouldn't
know this in many cases unless you waded through the footnotes of regulatory
In a recent report, Hodgson found that the median year-on-year increase in
total CEO pay doubled last year to more than 30 percent. The average increase
was 91 percent, thanks to 27 CEOs who made more than 1,000 percent more than
they were paid a year earlier.
(Hodgson didn't include Cisco Systems' John Chambers, who received a salary
of just $1 in 2003 but, thanks mostly to stock options, took home $38 million
last year -- an increase of 4 billion percent.)
The Corporate Library report is arguably the most thorough accounting of CEO
pay available. Its figures are based on the proxy statements of the country's
1,850 largest companies.
Hodgson said he expects CEO pay to once again rise by about 30 percent this
year (we won't know for sure until most 2005 proxy statements become available
What Hodgson does know, however, is that the huge wads of cash filling the
stockings of CEOs are seldom tied to their companies' financial performance.
"There are a few companies where this is the case," he said. "But
in general, they are not."
So how does he account for the huge amounts of money these guys are making?
"I honestly don't know," Hodgson replied.
Perhaps if the Protection Against Executive Compensation Abuse Act passes,
we'll all have a better shot at answering this question.
The bill is sponsored by Rep. Barney Frank, a Massachusetts Democrat. I'd encourage
you to send him a note of support, but he doesn't take e-mail from people outside
Similarly, it's impossible to e-mail the House Committee on Financial Services,
where Frank's bill now resides. So much for transparency.
Something tells me, though, that corporate America knows just whom to contact
to fight this thing.
Holiday bird: Speaking of the magic of Christmas, the festive folk at San Francisco
ad agency Venables, Bell & Partners have mailed out "holiday fingers"
that cover a certain middle digit long associated with a most un-merry sentiment.
"The next time someone questions your good cheer," the box says,
"simply slip the comfortable, festive, 100 percent Egyptian cotton sheath
over your longest and most expressive digit.
"Then hold it up directly in front of their nose and show them exactly
how much goodwill to mankind you hold in your heart. We're pretty sure they'll
leave knowing exactly where you stand."
Paul Venables, the agency's co-founder, told me the fingers are a response
to "all the people who fake holiday charm."
"The holidays are overdone and this is a reaction to that," he said,
adding that he mailed out about 150 fingers, "mostly to people who understand
our sense of humor."
Programming note: I'll be AWOL from these pages for the remainder of the year
-- burning off the last of my vacation time -- but not out of reach.
I'll be sitting in for Gene Burns on KGO radio Monday through Friday, 7 p.m.
to 10 p.m., 810 on your AM dial. Give a call at 808-0810 (all area codes) if
you want to vent, gripe, rant or otherwise revel in this special time of year.
And happy holidays to you and yours.
David Lazarus' column appears Wednesdays, Fridays and
Sundays. Send tips or feedback to firstname.lastname@example.org.