Stocks may fall, but pay doesn't

But after the subprime meltdown, Bear's stock began a long slide, and early this year, rumors circulated on Wall Street that the firm didn't have enough ready cash on hand. Last month, Bear's trading partners and clients began demanding their money, putting the firm at risk. In mid-March, to avoid bankruptcy, Bear Stearns reached an agreement to sell to JPMorgan Chase jpm for $2 per share (later raised to $10). After the deal, Cayne sold his stock for $61 million, enough to retire on but a fraction of what it had been worth a year earlier.

Building long-term value

According to Mark Van Clieaf, who runs compensation consultancy MVC Associates, the 12-month pay period makes no sense. "In a one-year period, anyone can make the numbers look good," he says. "If you aren't looking at measuring a business over a four-to-six-year performance period, you're going to mismeasure a business, because it takes that long for new investments to work their way through the profit-and-loss statements."

In recent years, boards of directors at companies such as General Electric, DuPont and AmEx have begun looking at long-term goals when structuring CEO compensation packages.

In the case of AmEx, the compensation of CEO Chenault is measured over a six-year performance cycle. Van Clieaf says AmEx's peers might have benefited from a similar pay plan.

"If that had been in place for most of the Wall Street CEOs, would they have made the risk and product decisions they did, knowing they would have to live with them? I'm not sure they would have," he says.

Good work?

Jeffrey Mezger

KB Home CEO

Salary:$1 million

Bonus:$6 million

Incentive compensation:$97,500

Restricted stock awards:$2 million

Perks:$972,604

KB Home stock price:?59.6%

1 — Fiscal year ended Nov. 30, 2007

Goodbye

Charles Prince

Former Citigroup CEO

Bonus:$10 million

Unvested restricted stock

and options:$28 million

Annual perks:$1.5 million

Citigroup stock price:?46.8%

2 — Fiscal year ended Dec. 31, 2007

Nov. 30, 2006

$51.69

Nov. 30

$20.89

Jan. 3

$55.25

Nov. 4

$37.73

Prince is

forced out

Daily stock closes for KB Home

Dec. 31

$29.44

Daily stock closes for Citigroup

Page
  • 1
  • |
  • 2
  • |
  • 3
  • |
  • 4
Join the Discussion
blog comments powered by Disqus
 
You Might Also Like...