Michelle Singletary: The Color of Money
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?
Last year, the chief executives of at least 32 companies took the symbolic salary of $1 a year, according to Equilar, 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.
Executive compensation has again become a hot-button issue as company after company tanks, taking the economy down with them. On the gut level, it just feels morally wrong for executives to earn millions while shareholders and employees suffer so badly.
Ideally, executive compensation should be set by the marketplace and not by the government. Pay for performance is what we all expect. 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 compensated handsomely while begging for a bailout. Even if their companies go broke, the bigwigs will 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 executives are compensated.
If we now have an economy in which we cannot allow certain industries or companies to fail, then we need better governance over executive compensation. We need to place checks and balances so 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.