Les Jones: Executive Pay is Out of Control in Some Companies

January 05, 2007

Economics > Executive Pay is Out of Control in Some Companies

Embattled Home Depot Chief Executive Robert L. Nardelli, under fire from stockholders for earning hundreds of millions at the same time the company's stock fell and market share dropped, resigned suddenly today and will walk away with a severance package of $210 million, the company announced....During his tenure, Nardelli earned $240 million in salary, bonuses and stock options.
....During his leadership of the nation's second largest retail chain after Wal-Mart, Home Depot lost market share to home-improvement rival Lowe's Cos. and its stock price declined almost 8 percent.

Liberals and Democrats have been more outspoken on this issue. They're looking at it from a class perspective, but conservatives and Republicans ought to be concerned about it from a financial stability point of view.

Excess executive pay isn't the free market working. The market isn't making the decision here. As it is now the board of directors determine CEO pay, and it's a good old boy network of chronies. If shareholders had more control over executive pay this kind of excess pay and unaccountability could be contained. As it is companies and shareholders are getting looted, which is bad for shareholders, the market, and the reputation of American companies.

Posted by lesjones | TrackBack

Comments

The problem is with the isolation of the shareholders.

Shareholders nominally are the owners of the firm but have so little power and so little information upon which to make rational decisions. Thus we neglect our responsibilities as shareholders out of frustration.

We could increase the power of shareholders and induce more rational behavior into the economic system by opening up means to have a dialog ... such as forums sponsored by the corporations themselves.

I've voted against Al Gore being on the board of directors at Apple every time and would love to rally shareholders to prevent political patronage of this type by corporations.

Posted by: Larry at January 08, 2007