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October 9, 2011 in Opinion
Smart Bombs: CEOs cultivate pay myth
The Occupy Wall Street protests carry different meanings for different people. Lately, I’ve been mindful of a Clinton-era slogan that was tailored for frustrated people who “work hard and play by the rules” but couldn’t get ahead. Since then, it’s only gotten worse … for most people.
The rules are quite different on the rarefied rungs of the career ladder. I’ve long been bemused by the rationales for exorbitant CEO pay; rationales, by the way, that only apply to top executives, and only American ones. The excuses can be distilled thusly: “If you want the best, you gotta pay the best.”
Implicit in this is the self-serving notion that there are only a handful of folks with the chops to do such work. The idea that CEOs are a rare breed helps keep their lofty pay, well, aloft. And though some of them might be ineffective, they aren’t dummies. They leverage this myth to the hilt. As a result, they see to it that “golden parachutes” are added to their contracts.
Business writer Robert McGarvey toted up Hewlett-Packard’s costs for dumping three chief executive officers since 2005 and posted the results at the Internet Revolution website. It tops $80 million.
Carly Fiorina received $42 million for failing. Her replacement, Mark Hurd, got a mere $11 million. He would’ve been in line for more had he not signed on so quickly with Oracle, which turned a blind eye to Hurd’s alleged expense account fraud and an affair with a consultant. Hey, you can’t sweat the small stuff when the pool of qualified executives is so shallow. Finally, there’s Leo Apotheker, who almost lasted a year before being forced to deploy his $25.2 million parachute.
H-P has since hired Meg Whitman, who left eBay to run for governor of California. She spent $119 million on that unsuccessful bid, and got nothing in return. Not to worry. She is safely enrolled in the CEO protection program, where success is rewarded – and failure is lucrative, too.
If H-P ever tires of financing CEO myths, I’d be willing to take over. Just pay me $999,999 a year (just in case the liberals impose a millionaire’s tax) and I’ll forgo the golden parachute. In fact, I’d adhere to the same severance rules that apply to the poor souls who will be laid off due to my incompetence.
Old Boys Club. This recycling of CEOs reminds me of baseball managers. At the start of this season, 17 of the 30 Major League skippers had steered other teams. Many had been fired; some multiple times. Apparently, there’s this belief that it’s the rare man who can manage a clubhouse and chew tobacco at the same time.
Rest in peace. Steve Jobs is the kind of chief executive who ought to be revered. As the founder of Apple and owner of Pixar Studios, may his soul soar to infinity and beyond. His accomplishments need no repeating, but another great man also died Wednesday.
The Rev. Fred Shuttlesworth, 89, led the fight to desegregate Birmingham, Ala. He somehow survived beatings and bombings to take on Bull Connor, the brutal police commissioner best known for unleashing snarling dogs on small children. Shuttlesworth pestered Martin Luther King Jr. to focus his protests on Birmingham, and the civil rights leader eventually relented. King’s inspirational “Letter From a Birmingham Jail” is known worldwide. Lesser known are the courageous acts of Shuttlesworth that paved the way for King’s Alabama marches.
It’s odd that on the day Shuttlesworth died, he was once again overshadowed. But it should not diminish his human rights legacy.
Jury is out. What do the trials of Tom DiBartolo, Robert Lee Yates, Joseph Duncan and Jay Olsen have in common? All were preceded by massive media coverage and intense emotions, but none of them included a change of venue. DiBartolo and Olsen were law enforcement officers. Yates and Duncan were serial killers. There was no injustice in keeping those trials in their respective hometowns.
Yet, Judge Fred Van Sickle has determined that the trial of Spokane police Officer Karl F. Thompson must be moved to Yakima. Where is the evidence that publicity would taint justice here?
Smart Bombs is written by Associate Editor Gary Crooks and appears Sundays on the Opinion page. He can be reached at garyc@spokesman.com or at (509) 459-5026.
Smart Bombs: Greatest generation? Not us 
gmorton on October 09 at 12:46 p.m.
Gary Crooks wrote,
“The excuses can be distilled thusly: ‘If you want the best, you gotta pay the best.’ … Implicit in this is the self-serving notion that there are only a handful of folks with the chops to do such work.”
Yes, there are. And that is not the opinion of “self-serving” CEOs, but of the boards who hire them.
Hindsight is always revealing, but never impressive. Perhaps you should consider the information available to those boards before they hired Fiorina, Hurd, Apotheker, and Whitman.
* Fiona: “Fiorina led corporate operations for the spinoff from AT&T of Lucent, reporting to Lucent chief executive Henry B. Schacht; she played a key role in planning and implementing the 1996 initial public offering of stock and company launch strategy. … In 1997, she was appointed chairman of Lucent’s consumer communications joint venture with Philips consumer communications. Later that year, she was named group president for the global service provider business at Lucent, overseeing marketing and sales for the company’s largest customer segment. In 1998, Fortune magazine named her the ‘most powerful woman in business’ in its inaugural listing, and she was included in the Time 100 in 2004 . . .”
http://en.wikipedia.org/wiki/Carly_Fiorina
* Mark Hurd: “Hurd spent 25 years at NCR Corporation, culminating in a two-year tenure as chief executive officer and president. His leadership was marked by successful efforts to improve operating efficiency, bolster the product line and build strong leadership. In the fiscal year of 2004, NCR generated revenue of $6.0 billion, up 7 percent from a year earlier, and net income rose nearly fivefold to $290 million.”
http://en.wikipedia.org/wiki/Mark_Hurd
* Leo Apotheker: “Before his appointment as SAP’s co-CEO, Apotheker was deputy CEO from 2007 to 2008, member of the SAP AG executive board and president of global customer solutions and operations from 2002 to 2007, and president of SAP EMEA (Europe, Middle East, and Africa sales region) from 1999 to 2002. He was CEO and founder of SAP France and SAP Belgium (from 1995 to 1997) and president of SAP’s South West Europe region (from 1997 to 1999) … In a ceremony in Paris on December 5, 2007, Léo Apotheker was honored with the French Légion d’honneur in recognition of his business leadership and contribution to the French economy. As the CEO and founder of SAP France and SAP Belgium, and later as president of SAP EMEA, Apotheker played a key role in increasing competitive capabilities and innovation for French industries.”
http://en.wikipedia.org/wiki/L%C3%A9o_Apotheker
Meg Whitman: “Whitman joined eBay on March 1998, when it had 30 employees and revenues of approximately $4 million. During her time as CEO, the company grew to approximately 15,000 employees and $8 billion in annual revenue by 2008.”
http://en.wikipedia.org/wiki/Meg_Whitman
I’m sure that if you could present a comparable track record HP would be happy to hire you at $999,999/year. And give you a golden parachute if you asked for it.
hardwroc on October 09 at 1:13 p.m.
Gmorton, you fail to mention the “board” has their pay set by the CEO and other board members.
This amounts to UNION members being responsible for setting the pay of one another. Do you think THEY TOO may pay one another well?
And would you PLEASE add to your list of “success stories” Joe Nachio, and Phil Anschutes?
The CEO for ATT they fired in ONE year? And need I go on with WALL ST? Over a thousand million dollar BONUSES for setting the entire worlds economy back 50 years, and still the EXECS of Corporate America blame UNIONS for our status.
Please notice, union compensation has stagnated for decades while exec pay, has skyrocketed, and people actually believe the accusations it’s UNION greed ruining America.
It must be nice to have your pay set by your golfing buddy, and own your own media to spread the propaganda that unions have somehow taken the money, while it’s in plain sight WHO has the cash and it’s NOT the commoners.
Kivaari on October 09 at 2:34 p.m.
hardroc, Own your own media, I suspect you mean FOX. What about GE owning NBC, MSNBC, CNBC and other leftist outlets?
Why should any worker care about what the boss and stockholders earn? If your union job has OK pay with OK benefits all you should be wanting is for your company to keep going strong. As an individual you need to invest in your employer. No, you don’t need to buy stock, you just need to keep an eye on waste and inefficiency. If you cut waste and excess you will join in the financial rewards as well. I know too many union people that think it is great fun to destroy the profits of their employer through theft, sabotage and laziness. They wonder why the management isn’t keen on wage increases.
Pretty much every retirement account in America is funded with corporate stock investments. Every state has the retirement funds invested in the stock market, often world wide investments. Yet the first people to want to destroy their future are the public employee unions.
Why all of the wage envy? If your boss runs a profitable work place and he owns a good deal of stock, why deny them a profit.
Most of these big payouts are in the form of stocks.
The class warfare attitudes of the ignorant people like the Occupy Spokane or Occupy Wall Street crowds is the same thing that led to millions of people being slaughtered in the last 200 years.
Why should people that invest in a corporation be resented? Why should people that did not invest reap the earnings of others? If people invest and loses, it is their loss. If unions want a share of the earnings, then they should share in the loss as well. The share the wealth crowd is destructive to the countries well being.
gmorton on October 09 at 4:47 p.m.
hardwroc wrote,
“Gmorton, you fail to mention the ‘board’ has their pay set by the CEO and other board members.”
Yes, it does, subject to veto by the stockholders. Just as with Congresscritters and City Councilmen. That is their job.
“Please notice, union compensation has stagnated for decades while exec pay, has skyrocketed, and people actually believe the accusations it’s UNION greed ruining America.”
Well, hard, there is no connection between the two. The union worker and the CEO are each paid what their respective services are worth in the market. A global market, diversification, the pace of change in many markets, and constantly evolving technology have raised the value of managers who can keep all those balls in the air. Meanwhile, automation and an expanding global workforce have reduced the value of labor in most manufacturing and many service industries.
Economies are not zero-sum games, hard. CEO salaries do not come out of workers’ pockets. They come from the value of the services those CEOs add to the company’s bottom line, just as do the wages of workers.
Orphan on October 09 at 6:48 p.m.
Well said Gmorton.
DickAdams on October 09 at 7:33 p.m.
When will everybody realize its the “golden” rule? Those who have the gold shall rule!
Orphan on October 09 at 8:25 p.m.
Dick they wont ever, instead of spending their time working they will complain, what a waste of talent.