There's no time like a crisis to finally get serious about reining in executive pay
When the chief executives of General Motors and Ford said they'd take $1 a year in salary if Congress bailed their companies out, I rolled my eyes. Not for a moment did that gesture make me feel better about the possibility of the automakers receiving welfare.
Who in their right mind thinks a chief executive earning a $1 a year is actually making a sacrifice?
Last year, the CEOs of at least 32 companies took the symbolic salary of $1 a year, according to Equilar Inc. We regular wage earners know darn well these guys will get stock options, benefits, and perks that far exceed what most of us will earn in our lifetimes.
From 2006 to 2007, the median value of total stock holdings and accumulated retirement benefits for Fortune 500 chief executives increased 6.1 percent, to $56.7 million. These amounts include pension benefits, deferred compensation, outstanding stock-option awards, unvested stock awards, and shares owned outright.
Executive compensation has again become a hot-button issue as company after company tanks, taking the economy along with them. On a gut level, it just feels so morally wrong for executives to earn millions while shareholders and employees are suffering so badly.
Ideally, executive compensation should be set by the marketplace. Pay for performance is what we all expect on our jobs. But we know that chief executives, at least those running major corporations, are different. There's so much more at stake when they fail to do their jobs properly. Just look at the auto industry. The executives who ran Chrysler, Ford, and GM off the road are still getting compensated handsomely while begging for a bailout. Even if their companies go broke, the bigwigs will still get millions.
But there's some good that could be had from the current crisis. When someone is pleading for a handout, you can get something in exchange. It would be idiotic if Congress didn't find a way to better control the way CEOs and their immediate underlings are compensated.
If we now have an economy in which we can't allow certain industries or companies to fail, then we need better governance over executive compensation. We need checks and balances so that top executives aren't allowed to run firms into the ground while enjoying outrageous pay packages.
Perhaps one way is to focus more on the boards that approve executive pay. Let's hold accountable the people responsible for granting the monstrous stock options, bonuses, golden parachutes, and other benefits.
Last year, according to preliminary findings by the Corporate Library, an independent research firm, median total compensation for individual directors of S&P 500 companies was nearly $200,000.
This is the third year of double-digit increases for directors and boards. Is it no wonder that executive pay is so high? The people determining how much executives will get are lapping up the money, too.
Michelle Singletary is a columnist for The Washington Post. She can be reached at singletarym@washpost.com. 