For several decades, my mailbox has been cluttered each year with annual reports and proxy statements from companies in which I own shares. The annual report, with its glowing color photos, tells me just how wonderful the company did in the past year. The introductory essay from the chief executive relates how wonderful things will be next year. But the financial summary may be contradictory to management’s self-praise. More of that may be confirmed if I wade deeply into the fine print in the back part of the report. The other part of the package, which many of us share, is a folder and statement soliciting proxy votes for positions taken by the corporate board. Any resemblance between the board’s action and the optimistic annual report may be hard to find.
We are asked to vote for the reelection of board members and the choices of new ones picked by the incumbents. Then comes a list of the top five corporate executives and a statement of how much money and other compensation they made in the current year and previous ones. The CEO’s basic pay is $1 million. Follow the listings across the page to see how much more the CEO earns in stock options, deferred income, fringe benefits, pension guarantees (gold parachutes) for dismissal or retirement, and bonuses for purported good behavior. The amount at the end of the line is 10 to 20 times that $1 million salary. The major item on which we shareholders are asked to vote and endorse the board’s action is a package that will fatten the CEO’s income for next year.
Part of the rationale for this increase is a claim that the CEO’s compensation is pegged to the profitability of the company, for which he (or, very occasionally, she) is to be rewarded. But when I go back and look at the financial statement—sales, profits, dividend payments—there is no basis for bonuses and even a good argument for cutting payments and/or dumping the top managers. So I take my pen with black ink and vote against the proposals. I also mark my ballot against any director I conclude lacks competence and objectivity. So far as I can recall, my vote has never been part of a majority.
But last October, there came some votes cast by Kenneth Feinberg, the US Treasury Department’s “czar” of corporate compensation, which are achieving what stockholder votes seldom did. The circumstance, lest you may have forgotten the news stories, relates to Wall Street and other companies that were loaned federal money in the fall of 2008 and since then. The purpose was to prevent the demise of major companies—General Motors, Chrysler, AIG, the insurance cartel, leading banks, brokerages, and others—whose incipient bankruptcies would have made the stock market plunge and financial slashes even more devastating to the rest of our country and all of the others.
Some of the companies, including AIG, had announced that they would resume bribing their top brass, even though it meant that they were using borrowed federal funds. I would assert far more concern about the 10% of all other workers who are jobless and lacking any income than I would express sympathy for someone who gets only $2 million instead of $6 million.
Let me confess that I have never had a situation in which I made $1 million in a year, even if I wrote 1 million words that year. And I never got a $1 million bonus, even if my prose was pellucid. And that applies to this “Chronicle.”
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