| Chief Extortion Officers |
26 May 2003
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Shareholders Rebel on Executive Pay
GlaxoSmithKline shareholders threw out the exit package for chief executive Pierre Garnier last week, and good for them. No one is worth $33 million as he leaves a company. What one hopes is that CEOs and their like will discover that money is no substitute for esteem and honor. More likely, one hopes that investors learn not to over-pay the under-achievers.
The argument for these extremely high rates of pay runs something like this: millions must be showered on these business geniuses so that they can make billions for the sharesholders. Without the motivation of a large pay check, they will go elsewhere and perform their miracles.
One might ask "where are the profits?" Where are the rising stock prices? Where is the return on investment? How is it possible for a man to earn millions based on his talent for returning shareholders value while the value of the stock tanks?
Moreover, money does not attract talent per se. Mr. Alan Greenspan's pay as Chairman of the Federal Reserve is merely $175,000 per year. He is worth just about every penny. When he calls Mr. Garnier at GSK, does he get put on hold because he is not as wealthy? One doubts it. And Mr. Bush, with this $500,000 or so a year, government house and vacation home, does he feel he'd be a better president if he got paid more? Indeed, had he been a $1 million a year president, might he not have bungled his way in the latest tax cut debate?
In capitalism's darkest hour, the Great Depression, America was saved by businessmen who served in government for $1 a year. Indeed, FDR's "Dollar a Year" men made it possible for everything that has followed economically. Doing a good job deserves good remuneration. Doing a bad job does not entitle one to millions worth of golden parachute.