A blog post last week, May 2010 Be the Year That Charles Wang Is Brought to Justice, touched a nerve in a reader who commented on the performance bonus of over $600 million that software vendor CA is taking legal action to recoup from Wang. As the reader pointed out, a bonus like that would be obscene even if Wang, CA's co-founder and former CEO, wasn't so widely seen as the mastermind behind the financial accounting fraud that almost destroyed the company.
The reader put that outrageous sum in a context that warrants highlighting here:
"Just to put that into perspective, $600 million is enough to pay 300 engineers a $100,000 salary for 20 years. Or 6,000 engineers $100,000 for one year. Imagine what CA could do with 300 high quality engineers for 20 years! Certainly more than this one CEO. Pretend for a moment that he isn't a criminal (which requires quite an imagination). If he were a saint, that type of bonus is stealing from the investors who no doubt had no say in the matter."
Indeed, the inexcusable excesses that are widespread in executive compensation at publicly held companies are screaming for a lot more urgent attention than they're getting. For one thing, the excessiveness is hardly limited to the CEO suite. It's happening far too frequently at the CIO level as well.
A striking example lies in the rest of a story that I touched on in another blog post last week, Age Discrimination in IT: At Least the Pain Is Shared. I mentioned that my wife, a 56-year-old HR executive who has been unemployed for almost a year, is wondering whether her age might be a factor in the difficulty she's having in finding a job. What I didn't mention is that the reason she's unemployed is that she was among the 7,000 employees at The Home Depot who were laid off last January. Nor did I mention that not long before that, Bob DeRodes had left his job as CIO at The Home Depot. In his case, the departure was a voluntary one-he left for a job as chief technology officer at First Data. The deal he got at First Data must have been an awfully attractive one, because the compensation package he left at The Home Depot was in the neighborhood of $5 million.
I don't know how many IT workers were among the 7,000 on the layoff list my wife found herself on, but I do wonder if DeRodes was able to look any of them in the eye. What's most troubling is that if he was so inclined, he'd be able to point to cases that are far more outrageous than his.
Take Hewlett-Packard CIO Randy Mott, whose total compensation for 2008 was $28,293,134. Now, Mott is a really good guy, but when you consider that he could have made, say, $3 million and change, and laid off 250 fewer breadwinners each earning $100,000, something's wrong with our sense of balance.
The aforementioned reader suggested that the answer lies in shareholder approval of all executive compensation packages. That's an interesting idea, and one I broached in a mid-2008 interview with Anne Mulcahy, who at the time was CEO of Xerox. Mulcahy was also No. 13 on Fortune's list of highest-paid women, with a compensation package of roughly $13.5 million. This is what Mulcahy had to say on the subject:
"I'm not necessarily sure than an advisory vote on pay is the most productive use of our shareholder voices. I do believe that is the job of a compensation committee [of the board of directors], and that shareholders now have the ability, with majority voting, to say yea' or nay' to the people that they put on boards, and that that's appropriate. Executive pay is a complicated set of decisions and discussions, and suggesting we're going to solve it with advisory votes from shareholders -- I don't think that's the way it should be addressed."
What do you think? Should shareholders have a voice in determining executive compensation packages? And is any executive worth the livelihoods of hundreds of families?