Today's New York Times, taking a break from speculation on the Clinton marriage, shows just how the clubby atmosphere of corporate boards helps executives help themselves -- and their friends -- to huge wads of corporate cash, at the same time as they're jettisoning health care coverage and workers:
The discussion inevitably turns to the changes at Home Depot under its chief executive, Robert L. Nardelli. A growing source of resentment among some is Mr. Nardelli's pay package. The Home Depot board has awarded him $245 million in his five years there. Yet during that time, the company's stock has slid 12 percent while shares of its archrival, Lowe's, have climbed 173 percent.
Why would a company award a chief executive that much money at a time when the company's shareholders are arguably faring far less well? Some of the former Home Depot managers think they know the reason, and compensation experts and shareholder advocates agree: the clubbiness of the six-member committee of the company's board that recommends Mr. Nardelli's pay.
Two of those members have ties to Mr. Nardelli's former employer, General Electric. One used Mr. Nardelli's lawyer in negotiating his own salary. And three either sat on other boards with Home Depot's influential lead director, Kenneth G. Langone, or were former executives at companies with significant business relationships with Mr. Langone.
In addition, five of the six members of the compensation committee are active or former chief executives, including one whose compensation dwarfs Mr. Nardelli's. Governance experts say people who are or have been in the top job have a harder time saying no to the salary demands of fellow chief executives. Moreover, chief executives indirectly benefit from one another's pay increases because compensation packages are often based on surveys detailing what their peers are earning.
[snip]
Since hiring Mr. Nardelli, 58, the board has awarded him more than $87 million in deferred stock grants and $90 million in stock options, according to an analysis by Brian Foley, a compensation consultant in White Plains. Mr. Nardelli's salary, bonuses and a company loan make up most of the rest of his $245 million compensation.
Even last year, when Home Depot's stock was unchanged, the board raised his salary 8 percent, to $2.164 million, and increased his bonus 22 percent, to $7 million.
[snip]
I.S.S. claims there is a "disconnect" between Mr. Nardelli's pay and Home Depot's performance. "Moreover, poor compensation design, a lucrative employment agreement, and arguably egregious compensation practices call into question the fitness of the company's Compensation Committee members to serve as directors," the advisory firm said in a report it issued two weeks ago.
The board disagrees, saying that it based Mr. Nardelli's pay and bonus last year on the company's "outstanding operating performance," his "continuing success in developing a new foundation for long-term growth" and his "continuing superior leadership," according to a statement from the company.
It's obvious that "superior leadership" is some variant of "You scratch my back, I'll scratch yours."
American workers have been like sheep in recent years, meekly accepting the pay cuts, the cuts in health care coverage, the long hours, the anxiety about taking vacations lest we be perceived as dispensable -- while the CEOs and Boards of Directors of the companies for which they work form a private club of reward-for-nonperformance.
It's astounding to me that in a country where hard work and honesty are supposed to be what's rewarded, so many workers still defend these practices. Perhaps they are laboring under the delusion that someday they too might be invited into that exclusive club.
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