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I dont know about you, but if I missed deadlines and other work-related performance targets, I would certainly be on probation and possibly out of a job. That doesnt seem to be the case for many major New Economy CEOs.
This elite group seems to float above the fray, getting big raises and bonuses even as their companies get up close and personal with the deep inner plumbing of the Recession That Nobody Has the Guts to Call By Name.
Just look at my favorite CEO, Bernie Ebbers at WorldCom, who got a whopping $10 million bonus last year, plus a $65,000 salary increase — he took home a $1 million paycheck — and 1.2 million additional stock options, although those are currently worthless. If his game were golf, Ebbers would surely be worthy of this special treatment. But telecom isnt duffing, and the lowest score doesnt win. WorldCom lost a staggering 60 percent of its market cap last year and its revenue grew at 8.9 percent over 1999. Earnings inched up an anemic 3.7 percent. And the companys 2000 net profit margin dropped to 10.6 percent, a decline of 1.9 percent.
Not a great performance. Yet Ebbers can now buy another vacation home with his reward for a dismal year. We should be so lucky.
Hes not alone. According to a survey from Pearl Meyer & Partners, the CEOs of the top 200 U.S. companies averaged a lavish $10.9 million in pay last year, up 16 percent from 1999. Stock option compensation was up 28 percent at $6.45 million, and bonuses were up 20 percent to an average of $2 million.
Meanwhile, the Nasdaq plummeted 41 percent last year. Clearly it was not a year to celebrate with big bonuses. And yet they happened, further proof that CEO pay-for-performance is often nothing more than lip service. Some companies say they must supply such rewards to avoid losing good CEOs. I say let the big cheese leave and find someone who doesnt require all the expensive stroking when they dont deserve it.
There is one bright light of a good example in Hewlett-Packard CEO Carly Fiorina, who returned $625,000 of her $2.7 million salary last year because of the companys weak performance. Bravo!