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What do these CEO's & Whores Have in Common?
The 5 most overpaid CEOs
Posted Oct 02 2009, 09:07 AM
By Michael Brush
A CEOs' job is to make a company perform for shareholders. So in a year like 2008, when the S&P 500 fell 37%, you’d expect CEOs to share your pain.
Not so much, a look at the final numbers from 2008 by the Corporate Library shows:
--While shareholders suffered miserably, annual pay for CEOs barely moved down at all.
--And total realized pay, a broader measure that includes money from cashing out stock options and stock vesting, was off by 6.4%. (That's because the market crash made it harder for CEOs to earn money cashing out options. But 6.4% is a far cry from the 37% loss suffered by shareholders.)
“Surely with the collapse in the economy seen last year, real pay should have declined by more,” says Paul Hodgson, author of the 2009 CEO Pay Survey, where these numbers come from. “If there were ever an argument that pay is fatally divorced from performance, then this surely is it.”
The Library flagged five CEOs in particular as the most overpaid of 2008 for pocketing extraordinary sums of money even though their socks have deeply underperformed both the market and their peers over the past five years. Here's the list in order of increasing pay levels for lousy performance.
Overpaid CEO #5: James Stewart of BJ Services (BJS), an oilfield services company. He pocketed $34.6 million last year, mostly from the $30 million he realized by cashing out stock options. Shareholders have not done so well. While the stock moved up recently on a buyout offer, it has lagged both its peers and the broader market significantly over the past five years.
Overpaid CEO #4: John Faraci of International Paper (IP). The stock fell 63% last year, nearly twice the decline in the S&P 500, and has done much worse than both the market and its peers over the past five years. But chief John Faraci got $38.2 million in pay last year -- including $21 million in pension payments when his pension fully vested. International Paper says Faraci's total pay was $13 million and that including the pension payments is a mistake.
Overpaid CEO #3: Brian Roberts of Comcast (CMCSA). He got $40.8 million in total pay last year, including more than $22 million from cashing out options and a $7.4 million bonus. But shareholders have lost more over the past five years than they would have by investing in the broader market, or a collection of cable companies. Comcast responds that the Corporate Library’s summary of Roberts’ pay is “deeply flawed” because it includes $22 million in income for options granted over 10 years that Roberts was forced to cash out last year because they were expiring. Comcast also says the company did well last year, meeting or exceeding guidance on metrics like revenue and free cash flow, factors that helped its stock outperform the S&P 500 by 32 percentage points. The company also says its pay policies do a good job of aligning top management with shareholder interests.
Overpaid CEO #2: Michael Jeffries of Abercrombie & Fitch (ANF)). He moved into the stratosphere of CEO pay in 2008, netting a cool $71.8 million. That includes a $6 million "stay bonus," even though he’s been with the company for 17 years, says the Corporate Library. It also includes the taxes Jeffries would have had to pay for his personal use of the company jet. Meanwhile, Abercrombie stock has vastly underperformed its peers over the past one, three and five years.
Overpaid CEO #1: Eugene Isenberg, chief of Nabors Industries (NBR), an oil and gas drilling company. Isenberg gained the top spot on the list by earning $79.3 million in 2008 even though Nabors stock tanked 51% that year. Most of the pay came from a $58.7 million bonus, which was calculated as a percentage of the company's cash flow. Nabors says a new employment contract doesn’t tie Isenberg pay to cash flow as much as the prior contract.
In contrast to these five CEOs, more than a few CEOs last year tried to share in their stockholder pain, by taking voluntary cuts in their base salaries. In February last year, Select Comfort (SCSS) chief William McLaughlin agreed to give up his base salary until company growth was restored. And Kevin Plank of Under Armour (UA) voluntarily cut his $500,000 base salary to $26,000 -- the annual salary he got when he founded the company.
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Posted Oct 02 2009, 09:07 AM
By Michael Brush
A CEOs' job is to make a company perform for shareholders. So in a year like 2008, when the S&P 500 fell 37%, you’d expect CEOs to share your pain.
Not so much, a look at the final numbers from 2008 by the Corporate Library shows:
--While shareholders suffered miserably, annual pay for CEOs barely moved down at all.
--And total realized pay, a broader measure that includes money from cashing out stock options and stock vesting, was off by 6.4%. (That's because the market crash made it harder for CEOs to earn money cashing out options. But 6.4% is a far cry from the 37% loss suffered by shareholders.)
“Surely with the collapse in the economy seen last year, real pay should have declined by more,” says Paul Hodgson, author of the 2009 CEO Pay Survey, where these numbers come from. “If there were ever an argument that pay is fatally divorced from performance, then this surely is it.”
The Library flagged five CEOs in particular as the most overpaid of 2008 for pocketing extraordinary sums of money even though their socks have deeply underperformed both the market and their peers over the past five years. Here's the list in order of increasing pay levels for lousy performance.
Overpaid CEO #5: James Stewart of BJ Services (BJS), an oilfield services company. He pocketed $34.6 million last year, mostly from the $30 million he realized by cashing out stock options. Shareholders have not done so well. While the stock moved up recently on a buyout offer, it has lagged both its peers and the broader market significantly over the past five years.
Overpaid CEO #4: John Faraci of International Paper (IP). The stock fell 63% last year, nearly twice the decline in the S&P 500, and has done much worse than both the market and its peers over the past five years. But chief John Faraci got $38.2 million in pay last year -- including $21 million in pension payments when his pension fully vested. International Paper says Faraci's total pay was $13 million and that including the pension payments is a mistake.
Overpaid CEO #3: Brian Roberts of Comcast (CMCSA). He got $40.8 million in total pay last year, including more than $22 million from cashing out options and a $7.4 million bonus. But shareholders have lost more over the past five years than they would have by investing in the broader market, or a collection of cable companies. Comcast responds that the Corporate Library’s summary of Roberts’ pay is “deeply flawed” because it includes $22 million in income for options granted over 10 years that Roberts was forced to cash out last year because they were expiring. Comcast also says the company did well last year, meeting or exceeding guidance on metrics like revenue and free cash flow, factors that helped its stock outperform the S&P 500 by 32 percentage points. The company also says its pay policies do a good job of aligning top management with shareholder interests.
Overpaid CEO #2: Michael Jeffries of Abercrombie & Fitch (ANF)). He moved into the stratosphere of CEO pay in 2008, netting a cool $71.8 million. That includes a $6 million "stay bonus," even though he’s been with the company for 17 years, says the Corporate Library. It also includes the taxes Jeffries would have had to pay for his personal use of the company jet. Meanwhile, Abercrombie stock has vastly underperformed its peers over the past one, three and five years.
Overpaid CEO #1: Eugene Isenberg, chief of Nabors Industries (NBR), an oil and gas drilling company. Isenberg gained the top spot on the list by earning $79.3 million in 2008 even though Nabors stock tanked 51% that year. Most of the pay came from a $58.7 million bonus, which was calculated as a percentage of the company's cash flow. Nabors says a new employment contract doesn’t tie Isenberg pay to cash flow as much as the prior contract.
In contrast to these five CEOs, more than a few CEOs last year tried to share in their stockholder pain, by taking voluntary cuts in their base salaries. In February last year, Select Comfort (SCSS) chief William McLaughlin agreed to give up his base salary until company growth was restored. And Kevin Plank of Under Armour (UA) voluntarily cut his $500,000 base salary to $26,000 -- the annual salary he got when he founded the company.
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