CEOs Scratching Each Others' Backs
Following my post yesterday about why I was against CEOs serving on another company's board, I got a lot of supportive email.
One reader, Burt, said:
I agree with you completely. I would like to see a comparison of the incomes of the board of directors for the companies that the CEO's from other companies sit on. They take care of each other, and do not take care of their own companies, in my opinion. I believe that the pay for the top management should not be set by other CEO's and get away from the "good ole boys network" and bring their pay back to a scale which is indicative of their performance at their companies.
Let's take Yahoo!'s (YHOO) board again, which I still believe is highly dysfunctional, even though I like what Carol Bartz is doing. Recall that one of the things that got investors steamed at the company was how the stock vastly under-performed against Google (GOOG) and NASDAQ from 2004 - today, yet the company company continued to award lavish pay to former CEO Terry Semel.
All told, Semel took out over half a billion dollars in executive comp from YHOO's shareholders during his tenure, even as the company passed on the chance to buy GOOG and Facebook and saw its search market share drop precipitously. Who served on the YHOO comp committee during this time? Art Kern, a current CEO; Roy Bostock (now Chairman), a former CEO, and Ron Burkle, a private investor who has been known to pay his fellow partners well and who also serves on the boards of Occidental Petroleum (OXY) and KB Home (KBH) where exec compensation still is very high compared to the rest of the S&P.
I don't think any of these men set out to deliberately overpay Terry Semel, they simply decided to pay him the way they'd want to be paid if they were CEO. This type of back-scratching in our boards needs to stop.
Originally published in RealMoney.com on 4/21/2009 7:35 AM EDT
