PALO ALTO, Calif. (CNN/Money) -
What you've simply got to admire about executives and the boards that hire them (usually made up of executives from other companies) is their creativity and initiative at sticking their hands in the cookie jar.
Slap them on the wrists for one no-no -- say, excessive use of stocks options -- and they'll figure out any number of other ways to get what they consider to be theirs.
The latest cause for outrage is word that even as the flight attendants and other unionized employees of AMR's American Airlines were voting to reduce their own pay, the executives of AMR were protecting the salaries that really matter. Their own, of course. (See more.)
The special goodies come in the form of a trust to protect the pensions of 45 top AMR executives, because it seems the board feels that executive pensions are more important than those of the rank and file. The board also established retention bonuses for six top executives equal to twice their base salaries.
The sad part is that American's antics aren't unique. According to a boffo piece in the current issue of Fortune by Janice Revell, all sorts of companies, including Delta Air Lines, UAL, EDS and FleetBoston, have set up sweetheart deals for their top executives. With many of the plans, executives who were only around for a short time get compensated as if they'd given years of service.
This executive pay debate used to be huge about 10 years ago -- the last time there was a prolonged slump in the economy. Then, during the boom times, the media was too busy writing about secretaries at Cisco Systems getting rich to notice how CEOs were being paid not to work.
Retention bonuses? How difficult do these boards really think it would be right now to find a qualified, experienced executive to run a big company for, say, $1 million a year? Since when did it become necessary not merely to pay someone for well for a job well done, but to pay them excessively for work they don't do as well?
Sears déjà vu Consider the following paragraph from the Wall Street Journal's report Friday about the latest financial results at what used to be the world's biggest retailer.
|Recently by Adam Lashinsky
"Sears, based in Hoffman Estates, Ill., is trying to regain ground against its competitors by improving its apparel and appliance businesses and continuing to prune costs. 'We have made good progress, but we still have much to do to get our cost structure to where it needs to be,' Chief Executive Alan J. Lacy said in a conference call with analysts."
Is it just me, or might those statements been have been made a decade ago -- or two decades ago -- by any number of Sears CEOs?
Spalding: Demise of a great name Elsewhere in the papers Friday, I was puzzled by the blurb saying that athletic apparel maker Russell had purchased the non-golf sporting goods brands of Spalding Holdings for $65 million.
You'd think such a prestigious name that generates $90 million a year of basketball, soccer and footballs would be worth a valuation of at least one times its sales. Unstated in Spalding's press release is that Spalding has been a huge black eye for leveraged buyout titan KKR, which invested $517 million in Spalding way back in 1996.
Indeed, in an October 2002 presentation at a private-equity investment conference, Mike Smith, director of investment research at Hewitt Investment Group, called the Spalding deal one of 10 "costly LBO failures" in recent years. That's the way the ball bounces, I guess.
Adam Lashinsky is a senior writer for Fortune magazine. Send e-mail to Adam at email@example.com.
Sign up to receive The Bottom Line by e-mail.