The Need for Executive Assessments
Discussion weblog on executive compensation. Discuss best practices, ideas, news, models, methods, theories, tools, questions and answers.
I just stumbled into an interesting short research finding in HBR of March 2013 "Long CEO Tenure Can Hurt Performance". Professor Xueming Luo, Vamsi K, Kanuri and Michelle Andrews report results from a study they did among 356 US companies between 2000 to 2010 analyzing the correlation between CEO tenure (length of time serving) and total shareholder returns.
Hewlett-Packard Co.'s Carly Fiorina, recently muscled out of her job over lackluster performance, walked away with an exit package worth $42 million. Boeing Co.'s Harry C. Stonecipher, pushed out over an affair with a female employee, nonetheless is eligible for retirement benefits of about $600,000 per year. Franklin D. Raines bowed out under heavy pressure in December following accounting problems at Fannie Mae. But the firm says he is now owed $114,393 per month in pension benefits.
Arthur Levitt Jr. (former chairman of the U.S. SEC) states in the Wall Street Journal of November 23st, 2004 that "The single greatest impediment to the restoration of confidence in corporate America is continuing instances of extravagant non-performance-based compensation. These huge paydays bolster a system in which executives have incentives to manage the numbers for short-term gain and personal payout, and not manage their business for long-term growth and shareholder value". (...) "The boardroom culture is fraternal, rather than skeptical. Therein lies the crux of the problem".
In a discussion worth reading between 3 leading FTSE-100 Financial Directora discussing the burden of corporate governance, Ken Lever, FD of Tomkins makes the following interesting remark on executive compensation disclosure:
Last year, CEOs of S&P 500 companies earned a median of 27.16 percent more in total C. than in 2002, according to a Corporate Library Study. CEOs earned a median annual C. of $2.3 million, and received an additional $2.3 million in restricted stocks or realized stock options.
State Controller mr. Westly called on June 28th, 2004 for the State Teachers' Retirement System (CalSTRS) to set responsible standards to encourage companies to link the pay of top executives to long-term company performance.
This year of stunted stock market growth seems to have ignited the smoldering anger of investors and employees. Many news articles mention boards having increased their paychecks and bonusses, while simultaneously slashing corporate costs and laying off thousands of employees.