9/13/2011 12:13 PM ET|
You're fired -- here's $9 million
The typical response I get from companies about escalating CEOs pay and perks amounts to finger-pointing. They say they keep raising pay because everyone else is doing it; it takes huge numbers to compete for talent.
"There's a race to the top, or the bottom, depending on how you look at it," explains Lisa Lindsley, director of capital strategies at the American Federation of State, County and Municipal Employees. "You get companies that want to benchmark their compensation above the median, and that just drives up the median."
This is a sort of Lake Wobegon logic, where all CEOs are above average and thus entitled to above-average pay -- which means pay spirals higher and higher. High severance pay is the flip side of this. Above-average CEOs never fail; those who don't deliver are almost always dismissed without cause, letting them collect big dollars on the way out.
There are ways for shareholders to fight back. They can vote against directors on board pay committees that cook up crazy pay plans. And they can also vote "no" in "say on pay proposals" -- a yea or nay vote on executive pay plans that companies now have to offer shareholders annually. But too few shareholders exercise these rights.
Which brings us back to Yahoo.
Earlier this year, the shareholder advisory firm Glass, Lewis & Co. chastised Yahoo for an executive pay policy which "has consistently failed to align executive compensation with performance." In light of this disconnect, the firm said, shareholders should be "gravely concerned" with the company's executive compensation program. Glass Lewis put Yahoo on its "Overpaid 25" list of Standard & Poor's 500 Index ($INX) companies with the worst pay-for-performance practices.
Yet only 29% of shareholders voted against Yahoo's executive compensation plan earlier this year.
Bartz's high-paying farewell
Yahoo declined to comment for this story, but, according to company filings, Bartz was fired without cause. That ensures she'll get her severance, even if it doesn't seem right to some.
The payout is "laughable, considering her performance," said Eric Jackson of Ironfire Capital, which holds a big stake in Yahoo. "I don't think she's entitled to anything. Two months' salary, tops."
Given her level of pay, a $10 million severance package is "unconscionable," echoed Brandon Rees, a corporate governance expert at the AFL-CIO Office of Investment, which also has a stake in Yahoo.
And while Bartz has always had a reputation as a free-speaking CEO, some wonder whether her farewell tirade could cost her. "It's been wild to watch. It's been like TMZ meets CNBC," says Jackson. "I would expect it from a 26-year-old engineer who gets fired and sends a flaming email on his way out but not from a CEO."
There have been reports that her public broadside against Yahoo, littered with four-letter words, would put her severance pay at risk. Like most employment contracts, hers contains a non-disparagement clause prohibiting her from bad-mouthing her former employer.
But as harsh as her words were, it's not clear they rise to the level of disparagement that actually hurts the reputation of Yahoo or its board, says Stein, the employment contract attorney. "(Yahoo) could potentially bring a lawsuit, but it would be unusual for a board to do that," he says.
Besides, a lawsuit may not be the best use of the company's time, at this point. "The board of a publicly traded company that is stagnant should be focused on running the company, not fighting with its ex-CEO," says Stein.
After all, there's another above-average CEO for them to hire.
At the time of publication, Michael Brush did not own shares of any company mentioned in this column.
Michael Brush is the editor of Brush Up on Stocks, an investment newsletter. Click here to find Brush's most recent articles and blog posts.
VIDEO ON MSN MONEY
I am applying for your open position of CEO. I am a very capable person and can drive your company into the ground for a total compensation package of $1 million, a real bargain in today's world.
I am waiting for your reply. Sincerely, Kanrai
This is the kind of crap that has been and is tanking our country, this over the top compensation of incompetents. Get fired for doing a bad job and get millions out the door ?
She only got 9.4 million? Surely she deserved more! 9.4 billion would have been a lot closer to what she deserved with her unique qualifications found no where else in the known Universe. Damn Yahoo, yet one more huge company paying slave wages to their top talented employees. What a rip off! How will this poor former CEO ever survive in this cruel, cruel environment on Earth????? Let's all join together and boycott Yahoo and pray for the survival of this poor, poor mistreated and underpaid former employee. I almost want to cry!
Where's the part of the article that says how many jobs they need to cut or how much work has to be outsourced to other countries to be able to pay these severance payments GREED is what got us to this point and greed is going to be what brings us down. I say a prayer for my children and there children every day so that some day people will drop the ME FIRST attitude and do what's best for everyone. As long as the people running this country keep running it the way they are running it I'm afraid all my prayers are in vain. I hope not!
These CEO's get paid in stock...and Mitt Romney wants a zero percent tax on long term cap gains...so all those CEO's who get paid in stock will get even more free money..and the US treasury will lose billions in tax revenue. But don't dare call it a class war.
You think this is bad? You should have seen what Home Depot panned out for 'Nardhead' Nardelli who single handedly almost brought Home Depot down with his GE practices which he was also the CEO. OVER $211,000,000. !!!!!!!!!!!!!!!!!!!!!!!! as severance. Then he became the CEO of Chrysler. Don't know what he got for severance, but he was one of the clowns that showed up in DC with his private jet, to answer to congress with a couple of other CEOs. We need homegrown CEOs that have not forgotten where they came from, and to give back to the people within the company. We have heartless, greedy, ruthless, and brainless CEOs and staffing at the top, and who put them there? The same exact group of people that hired them in to insure their cut of the pie when they leave, separate, get fired, etc...
It makes me sick to think of the amount of money these people make. Did they invent a solution to the oil crisis or global warming?
Nope. Just playing money games and complaining about it.
earned almost 60 million in two years working there.
What do you do with that amount of money?
Its true that the top 1 percent of everyone makes 90 percent of the money.
I say tax them at 80 % and build lives for the homeless.
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