Saturday, January 13, 2007

WOULDN'T WANT HIM TO BE LEFT HIGH AND DRY WITH NOTHING BUT THE CLOTHES ON HIS BACK AND $250 MILLION IN LIQUID ASSETS

The New York Times ran a story yesterday about CEOs' employment contracts and the lavish golden parachutes they provide, often when the CEO is being shown the door for doing a lousy job (example: Robert Nardelli's $210 million exit package, which he received as his reward for lowering the stock price of Home Depot).

This paragraph in the Times story jumped out at me, as an explanation for why CEO employment contracts even exist (emphasis added):

Executives who are being recruited argue that they need contracts because of the risks involved. Top executive turnover is at record levels: roughly 35 percent of departing chiefs in 2005 were forced out, according to Booz-Allen Hamilton, the consulting firm. Orchestrating a turnaround can take several years to pay off. And the relationship with the board may not work out.

"The risks involved"? What risks? The risk that the huge amounts of money these CEOs make while they're employed, the huge amounts they made from previous jobs, and the appreciation on their extensive assets won't provide them enough to make the payments on their third, fourth, and fifth houses if they're suddenly without a job for a few months?

Oh, and -- to state the obvious -- doesn't removing all risk give these guys absolutely no motivation to do a good job?

And if your heart still bleeds for the poor beleaguered CEO, remember this:

In 2005, the average CEO in the United States earned 262 times the pay of the average worker... a CEO earned more in one workday (there are 260 in a year) than an average worker earned in 52 weeks.

These guys don't have enough to live on? If you pay 'em for one day's work, they have enough to live on -- for a year. If it's enough for us to live on, it's enough for them.

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