Word: ceos
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...shareholders so sore? Because, as usual, corporate America has a taste for excess, particularly in the sheer number of stock options being granted. With nearly half the Fortune 500 companies reporting, about 6% granted their CEO at least 1 million stock options last year. (An option gives the holder the right to buy stock at a preset price within a specific period of time, regardless of what happens in the market.) You don't need to take off your socks to figure that a stock gain of merely $1--a slam dunk for any company that is not soundly asleep...
Another lavishly rewarded CEO last year was Lawrence Coss of little known Green Tree Financial, a company based in St. Paul, Minnesota, that finances mobile-home purchases. He was paid $102 million in salary and bonus. He was also given 2 million stock options valued at $35 million, presumably as an incentive. In his case too, shareholders have had much to cheer. They enjoyed a 47% return on their investment last year. But the huge numbers have people edgy. Could Green Tree not recruit a first-rate executive for, say, $50 million? "How much is too much?" asks Patrick McGurn...
More galling is exorbitant CEO pay at companies with laggard stocks. Gil Amelio, the new CEO of struggling Apple Computer, received total compensation valued at $23 million last year while Apple shareholders lost 40% on their investment. Nolan Archibald, CEO of Black & Decker, received total compensation of $6.5 million even though shareholder returns were a pathetic negative 13%. To be fair, in the case of Amelio, $16 million of his package was in stock options. That will prove vastly overstated if he can't fix what ails Apple, and if he does fix it, he's probably worth every penny...
...CEO-pay issue is beginning to feel like the start of a class war. Two weeks ago, the AFL-CIO launched a Website www.paywatch.org detailing CEO pay packages, producing an instant cyberjam among those trying to log on to feed their fury. There are now a dozen Websites devoted to executive pay. "It takes thousands, literally thousands of years to earn what your CEO takes home in a single year," fumes Richard Trumka, secretary...
...CEOs are never going to come cheap. The market for their skills is tight. Kodak's George Fisher got a two-year contract extension and 2 million stock options earlier this year when word leaked that he was under consideration for a job as president of AT&T. Kodak had poached Fisher from Motorola. Companies that choose to cut options grants will end up paying more in some other form of compensation, or losing their CEO...