Workforce Management staff writer Douglas P. Shuit writes in:“Pay Unchecked” that “[h]uman resources executives should show some backbone, and just say no to overblown CEO compensation packages.”
He discusses a bankruptcy report filed in federal court by court-appointed corporate monitor Richard C. Breeden in the Worldcom case.
“Breeden makes 79 recommendations in his 156-page report, and says that full implementation will make MCI a model for corporate governance. Among his proposals is a yearly limit of $15 million on CEO compensation. Under the old rules, [Worldcom CEO] Ebbers received $408 million in loans from the company during one 18-month period, and passed out $238 million to senior officers in 2002.”
“Critics say that lavish compensation programs, because they often are tied to loose control by corporate boards, can be a tip-off to much bigger problems, as was the case with WorldCom, Tyco and Enron. ‘Compensation tends to be a fairly useful window that gives you a lot of clues about how boards are operating and aligning their interests,’ says Ted White, director of the corporate-governance program at CalPERS, a public-employee pension system with assets of $149 billion. Companies that experience the largest layoffs, report the most underfunded pension funds and receive the biggest tax breaks also are among those paying the highest rates of executive compensation, according to a study published in August by the Institute for Policy Studies. The study also notes that the disparity between pay at the top and earnings of production workers remained well above historic levels. In 1982, the CEO pay gap was 42 to 1, whereas in 2002 it stood at 282 to 1. If the average annual pay of production workers had risen at the same rate since 1990 as it has for CEOs, their 2002 annual earnings would have been $68,057 instead of $26,267, the study says.”
“Bruce Ellig, retired corporate vice president of employee resources at Pfizer, Inc., and long active in the Society for Human Resource Management, says that human resources managers ‘could make a very big contribution’ in all this. But he adds that many human resources managers are way behind, and must become broadly knowledgeable in accounting and finance, Securities and Exchange Commission requirements and tax laws before they can bust into the top corporate tier where CEO compensation issues are decided. ‘If they had HR people who were smart enough and good enough to handle touchy issues, I don’t think a lot of this would have happened,’ says Ellig, author of The Complete Guide to Executive Compensation.”
There’s much more in this article, well worth reading and pondering.
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