CEO Pay – An Easy Target

Just the title “Pay Czar” leaves me with a negative connotation.  As does the concept of the government cracking down on executive compensation within a public company governed by an elected board of directors for the benefit of public shareholders.

Yesterday’s announcement that Bank of America’s Ken Lewis had agreed (was forced) to forgo his remaining 2009 compensation of $1.5 million and give back the $1 million he has earned over 2009 is troubling.  If Mr. Lewis did anything wrong to deserve this – as in criminally wrong – then he should be charged with a crime and prosecuted.  If he didn’t, then he has a right to his contractual compensation.

Of course, we all know what this is all about.  Perception.  CEOs are easy targets and actions against CEOs seem to satisfy the public for everything that is wrong in the world.  But, how arbitrary can it get?  Mr. Lewis’ retirement package is worth a reported $69.3 million, certainly a lot of money by any standard.  However,  explain to me how causing Mr. Lewis to give up $2.5 million is going to change the fact that he will still receive $69.3 million?  It won’t.  His penalty for bad performance is losing his job and that’s where it should stop.

Which brings me to the fairness issue.  If the government is going to penalize a CEO for past performance by taking away his pay, shouldn’t the taxpayers demand the same for Congress?  Perhaps we should have a Pay Czar elected by the people to monitor and judge the job performance of Congressional leaders.  In particular, I’m thinking about the policies of the House Financial Services Committee and it’s chairman Barney Frank that precipitated the housing and banking crisis in the first place.  Perhaps a dose of their own medicine will return some accountability to Washington.




About Mike

Mike has been an executive in the biotechnology industry for the past 20 years. Mike is a graduate of University of California, Santa Barbara, earning Bachelors degrees in Business Economics and Geography. Mike also earned his MBA in Finance from California State University, Fresno. Mike is married to the mother of his 3 children and currently lives outside of Boulder, CO. In his spare time Mike enjoys hiking, fishing, skiing, reading and coaching basketball.
This entry was posted in Board of Directors, Executive Compensation, Finance, Management, Politics, Social Issues and tagged , , , , , , , , , , . Bookmark the permalink.

One Response to CEO Pay – An Easy Target

  1. Ben Hoffman says:

    Sure! It’s all Barney Franks’ fault! And don’t forget Jimmy Carter. And how about Nancy Pelosi? She must be to blame for it, too. 🙂

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