We all know CEOs get lavish pay and perks, often while their companies falter. But consider this: One CEO is going to get more than $75 million after he's dead.
President Barack Obama has imposed a $500,000 salary limit for top executives at companies that get federal bailouts, but that won't begin to rein in this culture -- even if it is extended to other companies, as some lawmakers want.
Investors, however, can pick up where Obama leaves off because there's a rebellion afoot.
Shareholders will have a chance later this year to vote against excessive pay and perks at scores of companies, including Citigroup (C, news, msgs), JPMorgan Chase (JPM, news, msgs), AT&T (T, news, msgs), Walt Disney (DIS, news, msgs) and General Dynamics (GD, news, msgs).
Activists at labor unions and pension funds have put "anti-greed" proposals up for vote at the annual meetings of about 200 companies.
So watch your mail (or your e-mail) for the ballots that all shareholders get each year before companies' annual meetings, which usually are held in May. Read the ballot carefully. Don't just sign away your proxy.
Then apply an old political saw: If you don't vote, you've got no right to complain.
A gusher of greed
The companies' defense, almost uniformly, is that the huge pay packages attract top talent. But failed financial giants Countrywide Financial, Lehman Bros. (LEHMQ, news, msgs), Merrill Lynch and American International Group (AIG, news, msgs) paid their top executives very well. Where did that well-paid talent get them?But Obama's salary limit can do only so much because absurdly high levels of CEO compensation gush out through myriad channels. Limit one reward, the others go up.
- Talk back: Should executive compensation be reined in?
Giveaways include stock and incentive stock options, special retirement plans and lavish perks. Some CEOs have even wrangled promises for millions of dollars for years after they die, defying the adage that you can't take it with you when you go.
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To help stop this nonsense, check the ballots you get from companies you own for measures that:
- Ban payments to dead CEOs.
- Delay bonus and retirement payments to CEOs.
- Give shareholders the right to vote on CEO pay packages.
- Limit how much other work outside CEO pay consultants can do for a company, to avoid conflicts of interest.
One hitch: None of these votes is actually binding on companies. Boards can simply ignore them. But that's getting tougher and tougher to do as shareholders get active.
Here's a look at the problems behind the proposals:
'Golden coffins'
In most jobs, pay serves as an incentive to make people work harder. But a privileged few get paid even after they die, when they'll presumably work less. Prime examples:- By far the biggest rewards for moving on to the hereafter go to an executive at Comcast (CMCSA, news, msgs). The cable company has promised to pay chief Brian Roberts a $47.5 million bonus if he dies on the job. (The check would go to his heirs, of course.) There's also $13.2 million in continuing pay, plus restricted stock, for a total post-death payout of $75 million. Comcast says the continued bonus and pay for five years after Roberts' death offsets the lack of a company-funded retirement plan. Those plans, common for CEOs at large companies, can be worth tens of millions of dollars.
- Disney has promised to keep paying CEO Robert Iger's salary for three years after he departs for the next world, if he dies before leaving his job. As a result, his estate will get $4.5 million upon his death.
Such arrangements have reformers scratching their heads. "Pay is supposed to be for performance," says Cornish Hitchcock, a lawyer who crafts shareholder proposals filed by Amalgamated Bank LongView Funds. "If an executive is dead, you are not getting performance."
Yet "golden coffins" are fairly common. In 2006, at least 17% of Fortune 100 companies said their CEOs were entitled to death benefits, according to Equilar, an executive compensation research firm.
Companies defend these deals as a kind of life insurance. Disney, for example, explains that death benefits "can be an important inducement to attract and retain executives who seek to provide economic security for their families in the event of their death."
Continued: A delay in bonuses?
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