I Give Up …
The New York Times reports that Ivan Seidenberg, CEO of Verizon, collected $19.6 million in compensation last year, up 48 percent. The stock, meanwhile, fell 26 percent. Earnings dropped 5.5 percent. The firm's credit rating was downgraded. And 50,000 managers had their pensions frozen. The Board justified the pay packet, claiming that Seidenberg exceeded "challenging" performance benchmarks.
The article primarily examines the possible conflict of interest between Verizon and its executive comp consultants, Hewitt Associates, who do an enormous amount of non-comp business with the firm.
In general, there's been a firestorm surrounding executive pay this year. I've generally avoided the topic. I believe in markets—including markets for exec pay. On the other hand, when something looks downright silly ... it may well be downright silly. Seidenberg is but one of many examples of this magnitude of apparent disjunction between pay and performance.
Speaking of silly, one of the basics of setting comp is comparison to others in the same field. Thus, whatever idiot consultant first ratchets up the pay of some undeserving boss sets the tone for the rest of the pack.
(Why the hell do you pay the former Gillette CEO $185,000,000 for the act of peddling his company to P&G? I'd say that for giving up on his company he ought to be docked $185,000,000. Hey, I'm half serious.)
Frankly, I think the impact of mega-corp CEOs on performance is wildly overrated. Looking at the pay scales you'd think the CEO had done all the work of the company single-handedly. I acknowledge that there are probably a handful of CEOs who have indeed moved mountains—Gerstner at IBM in the 90s, Nardelli at Home Depot today. But by and large, the boss's impact, while important, is hardly as important as the pay disparity between him and his top lieutenants, let alone the rank and file.
So, I give up. I hereby join the parade of those who say, "Enough."