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Curbing executive entitlements

Most Americans go to work with a simple realization: Perform, or be out the door. But the Washington Post this week chronicled how well-paid executives were exceptions to the rule. In case after case, CEOs were paid six and seven-figure salaries and bonuses despite their company's stock price, public image, legal troubles or performance.

Among those who made a killing: Morgan Stanley chief executive Philip Purcell, who collected $22.5-million in pay and stock benefits last year, and Carly Fiorina, ousted from the Hewlett-Packard Co., who landed with a $42-million golden parachute. Several others, the Post found, were paid millions in salaries, bonuses and benefits even though their company's stock lagged, or they were pushed out in disgrace. Either way, top corporate executives have developed an obscene sense of entitlement. Even recent corporate scandals have not been enough to knock some sense into the nation's board rooms. According to the Post, salaries stayed strong even as corporate profits dropped in the late 1990s. "It's not something that can be explained by the economic fundamentals of a company," Lucian Bebchuk, a Harvard Law professor and director of the school's program on corporate governance, told the newspaper. Rather, experts claim, companies and the public have become immune to outsized pay for corporate chiefs.

Stockholders have become more aware and vocal in wake of the corporate accounting scandals, but a change in attitude needs to come from inside the company board room. Tying a CEO's pay to performance may be harder than quantifying whether lower-ranking employees meet the narrower requirements of their jobs. Chief executives, after all, ultimately are responsible for the performance of their entire company. But there's a big difference between adequate compensation and greed.

[Last modified March 24, 2005, 01:19:16]