MFG 2.0

CEOs: Overpaid Or Overperked?

(Or both, or neither?)

A recent edition of our Leadership Insights From The IW 50 eNewsletter detailed how Sunoco CEO John Drosdick had, in a bow to significant profit and revenue declines, voluntarily given up a number of job perks in 2006. In a SEC filing, the energy company referred to 2006 as being "a transition year for (executive) perquisites."

What have you seen? Was 2006 really a big transitional year for perks at level C? Will giving up company cars and corporate parking spaces like Drosdick did really make a significant enough bottom line impact either figuratively (in media/cultural perceptions) or literally (on the balance sheet) to matter?

Or should C-level compensation be subject to "clawback" dependent upon overall company performance (and not just malfeasance of corporate officers as written in SarbOx Section 304)?

It seems that in many cases the subjectivity of what constitutes "good" or "bad" company performance might be a pretty significant barrier to such a sharpening of SarbOx statutes.

For instance, consider recent news stories surrounding Intel CEO Paul Otellini, who got a 15% salary boost despite his company's net income dropping 42% and a 4% loss of market share to chief chipmaking competitor AMD. Or take AMD CEO Hector Ruiz, who himself was richly rewarded during a year when AMD's stock took a 60% plunge, erasing somewhere in the neighborhood of $10 billion in shareholder wealth.

Despite these sobering numbers, it could just as easily be argued that both the companies AND their CEOs are performing as well or better than can be expected in an increasingly tough global tech market after all, AMD did post a significant gain at rival Intel's expense, and Intel itself is primed to profit from the significant capital investments it has made in new products (including more powerful and energy-efficient chips) that should generate revenue growth for years to come.

Whatever happens in specific industries, the general pushback against what is seen as executive overcompensation whether in perks, pay or parking spaces is a good bet to continue down the road.

TAGS: Innovation
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