Trend: Investors lose when executives receive rich pay packages for poor performance.
Michael Brush at MSN Money describes five examples of exorbitant executive pay for poor performance.
The problem of executive pay has gotten so bad that pay experts quip that "pay for performance" has turned into "pay for pulse."
CEOs get rich pay packages just for staying alive and showing up -- regardless of how well their companies do. And many CEOs at the top of the pay pyramid do a pitiful job for shareholders.
[Here's] ... five of the worst offenders, taken from a recent study called "Pay for Failure." The study was created by Paul Hodgson of The Corporate Library, an independent research firm that helps investors assess risk in corporate governance practices.
...Pfizer shareholders can only wish that the company's stock price had done as well as Pfizer's CEO over the past five years. During this time, shareholders lost 35% as the stock fell to $24.60 from $38.20. Yet Pfizer chairman and chief executive Henry McKinnell made more than $15.5 million a year, on average, for a total of $78 million. He also has a pension package worth $83 million.
...pharmaceutical company Merck
(MRK, news, msgs)says it structures pay to align the interests of execs with those of shareholders. It hasn’t worked out that way. Shareholders have lost 41% in the past five years as the stock slipped to $33 near the end of last year from $56 at the start of 2001.
During the same time period, former chief executive Raymond Gilmartin made about $54 million, or around $10.8 million a year. That includes $37.8 million in profits from cashing out options over the past two years.
As chairman and chief executive of AT&T
(T, news, msgs)and of SBC Communications before it merged with AT&T, Edward Whitacre earned $85 million during the past five years, or about $17 million a year on average. Upon retirement he will continue as a consultant for three years at more than $1 million a year, and get lifetime access to the corporate jet, a car, an office and support staff. And he's in line for an annual pension of $5.3 million.
Shareholders have a five-year loss of 40% to show for Whitacre's efforts, as the stock has fallen to $23.50 from $39.30.
Rich pay packages for poor performance seem common in the telecom sector. BellSouth
(BLS, news, msgs)chairman and chief executive F. Duane Ackerman, for example, made about $46 million in the past five years. That works out to over $9 million a year. But shareholders lost 23% as stock fell to $27.40 from $35.60.
(SWY, news, msgs)chairman and chief executive Steven Burd earned $52 million, or $10.4 million a year, on average, over the past five years. During that time, shareholders lost 54% as the stock fell to $23.70 from $52.
Why do so many CEOs get so much for so little? The basic problem is that many boards are too close to managers, even though they are supposed to look out for shareholders.