Economy – CEOs Pay Higher in ’07 Despite Cloudy Economy.
As the American economy slowed to a crawl and stockholders watched their money evaporate, CEO pay still chugged to yet more dizzying heights last year, an Associated Press analysis shows. As the economy slowed to a crawl and stockholders watched their money evaporate, CEO pay still climbed to yet more dizzying heights last year.
An Associated Press analysis of companies in the Standard&Poor’s 500 index finds a median CEO pay package of about $8.4 million, an increase of $280,000 from 2006.
Collectively, the 10 best-paid CEOs made more than half a billion dollars last year. Yet half were leading companies whose profits shrank dramatically.
At the top of the AP list: John Thain, who took the reins of Merrill Lynch on Dec. 1, 2007. Thain’s compensation package was worth more than $83 million. This happened as the investment bank was experiencing its worst losses ever.
AP’s analysis found that two widely used yardsticks for corporate performance – stock price and profit – often had little or nothing to do when it comes to the CEO’s paycheck.
Take KB Home, battered by the subprime lending crisis and the weak housing market. According to the company’s proxy statement, CEO Jeffrey Mezger is entitled to a cash bonus based on a percentage of KB’s profit. The problem? There was no profit. KB Home lost almost $930 million for the year and its stock lost 60 percent of its value. But Mezger still made $24.4 million as valued by the AP, including a $6 million cash bonus. And in many more cases, overall pay packages ballooned in the face of a battered economy.
Consider General Motors’ CEO Rick Wagoner. Earlier this month Wagoner stood before reporters to soberly announce that things were so bad the company had to close four truck plants. The automaker lost about $39 billion for the year, and its stock price fell about 19 percent. But Wagoner? His pay rose 64 percent, to $15.7 million.
But there were some signs of a pull back: Out of the 316 companies surveyed that had the same CEO two years running, about two-fifths lowered the total pay package. John Mack, the CEO of Morgan Stanley was paid $41.7 million for 2007, a rough year for the bank. But Mack’s pay was largely tied to his performance in 2006. Because of the company’s heavy losses in the subprime lending crisis, the investment bank said Mack would not take home a bonus for 2007.
The AP examination mined data from the 410 companies in the S&P 500 that filed compensation disclosures in the first six months of this year. The AP used a formula that adds up salary, perks, bonuses, above-market interest on deferred pay, and company estimates for stock options on the day they were granted. -Ap