Michelle Singletary: We need checks and balances on executive compensation

Michelle Singletary - Idaho Statesman

Edition Date: 12/20/08

When the chief executives of General Motors and Ford announced that
they would take just $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?

Nobody.

Last
year the chief executives of at least 32 companies took the symbolic
salary of $1 a year, according to Equilar Inc., an executive
compensation research firm.

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 from $53.4 million, Equilar found. These
amounts include pension benefits, deferred compensation, outstanding
stock option awards, unvested stock awards, and shares owned outright.

The
issue of executive compensation has again become a hot-button issue as
company after company continues to tank, 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 and not by
government. Pay for performance is what we all expect on our jobs. The
harder you work or the more value you bring to your company, the more
you deserve to be compensated.

That's the ideal way to pay
people. 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 American 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 in
compensation despite their mistakes.

But there's some good that
could be had from the current crisis in corporate America. When someone
is pleading for a handout, you can get something in exchange for
rescuing them. It would be idiotic if Congress didn't take advantage of
this crisis and find a way to better control the way chief executives
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 to place some checks and balances so that top executives aren't
allowed to run firms into the ground while enjoying outrageous pay
packages no matter how their companies perform.

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 benefits.

Last year,
companies in the S&P 500 index spent an average of more than $2
million on board compensation, according to preliminary findings of a
director pay survey by the Corporate Library, an

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