Wednesday, March 30, 2011

Greedy corporate boards

Eric Jackson, The Street wrote "How Do You Slow Down Executive Pay?", Yahoo! Finance, 2011-03-11.  He thinks that we don't need the gimmicks live shareholder advisories on pay.  He says shareholders should simply throw the votes out.

I added the following comment to the article.

"I agree with Eric Jackson; vote the bums out.

I've felt like a lone voice for years.  I withhold my vote when the CEO gets over a million dollars a year or when the members of the board get over $100,000 a year.  The latter is nice work if you can get it; show up five times a year (not every board meeting!!!).  Many of us would be in the gravy with that pay.

And what is a CEO doing on the boards of other companies?  Isn't he or she being paid a lot of money to run one company?  Maybe the pay for being on other boards should be reimbursed to the company the CEO is running."

And later I added:

"Oh, I almost forgot about these boards gradually stealing the company from the shareholders that bought their shares on the open market.

To "align the interest of the board and the executives with the interests of the shareholders", they grant themselves stock, either directly or through options (the ability to buy shares at way below market value).  The net result is they are granting themselves more and more votes at a discount from what the regular shareholders paid.

In other circumstances, isn't this called skimming and either criminal or unethical?  Now, to put any kind of restraint on this behavior is called anti-business."

I didn't add that when I worked for Sperry Univac in the 70s, somebody published an article about attending a Sperry Board meeting.  The directors were served an elaborate meal that many hardly touched.  Some of the directors slept through parts of the meeting or said very little.

I've heard that in many companies, the board just agrees to what the company executives propose and go home.  Nice work if you can get it.