Executive Holiday Stockings
As we fly through another holiday season let’s take a look at some of the stockings hanging on the executive compensation mantle. This is the time of year for gifts and coal. Some are based on lists and requirements, others are a tad bit more…discretionary. In the end, like every year, most get something nice, some get more than they deserve, and others finally get a reminder that being bad has a cost.
The Perplexing List
Let’s start with the bankruptcy of Sears. They tried to find a new path to success and failed. In the end, about 70,000 people are likely to lose their jobs. At the same time, in an optically challenging request, the company has asked for approval for a $25 Million dollar pool for executive incentives. It would allow up to $8.5 Million for the top 18 executives and another $16.9 Million for another 322 executives. The company is hoping for a successful transformation, even though they have spent years failing at just that. Every company needs good leaders to succeed, but these leaders will be paid something nice even if they fail (again.) Employees who are losing their jobs and severance packages are rightfully confused.
The Incredibly Naughty List
CBS had less than a great year when it came to CEOs. Most notably, their former long-time CEO, Les Moonves, was accused of sexual harassment and worse by numerous women. Mr. Moonves had a famously rich pay package and his severance pay was due to be $120 Million. (Yes, this is about five times the amount Sears would like for about 350 executives.) The company decided to investigate and has recently announced that the severance amount will not be paid. It’s not that often that we see an executive lose out on contractual pay. Sometimes even the (former) CEO gets coal for the holidays!
The Nice List
Let’s face it, the nice list never makes the news. There are literally thousands of CEOs who are paid perfectly acceptable amounts of money. Even the most antagonistic executive pay critics have no complaints about these executives’ pay. In fact, pay compression is often an issue at small and mid-sized companies (privately held and publicly traded.)
As pay for certain highly skilled positions increases due to high demand and low supply, the differentials between many executive and non-executives have shrunk. These executives are hyper-aware of the optics of their pay packages and hold down their own pay to support their company’s success and help employee morale. This can be a counter-productive move since it makes it difficult to motivate and retain each successively lower level.
The key is to pay enough, to the right people, at the right time, for the right reasons, except when you don’t. It’s a perfect science that is on par with astrology or reading tea leaves, mixed with complex math and behavioral psychology. But that’s a topic for a future posting…