Friday, October 03, 2008

How much can you make in 3 weeks?

I usually don't speak out about CEO pay. I feel like it's an issue between the company and the CEO. If they want to pay the CEO a lot, that's their business. My paycheck is the amount my company and I have agreed on. If I think it's too much (not likely) I can return some of it and ask for a lower check. If I think it's too little, I can ask for more and even go somewhere else. I don't want someone else saying how much (or how little) I should get.

But sometimes, the facts need to be brought out. Take for example, Alan Fishman, CEO for Washington Mutual (WaMu). To be fair, Fishman came into a company that was on the way down. Mat McCormick who is a portfolio manager for Bahl & Gaynor Investment Counsel said that WaMu's "goose was cooked long ago."

So when he signed on, he received a decent package. It started with a sign-on bonus of $7.5million. Well, I guess he needs to buy some new suits to match his new job. So he needed that sign-on bonus. His annual salary was only $1million, small in CEO terms. Since the company went under in less than 3 weeks, he will only receive about $60,000. How can anyone expect to live on that?

And since he knew the company was having problems, he planned for the possibility that he may have to leave early. He will receive termination pay of $6.15million.

There are a few unknowns, what about his annual bonus? He was set to receive $3.65million, but since he didn't work a full year, how much will he get? That works out to about $10,000/day, but it's unclear if he will get the whole amount or just a daily amount.

And, if he made it through all of 2009, he was slated to receive a "long term" incentive of $8million. Now that he's being fired, it's not clear if he will receive that. (since when is one year "long term"?)

All totaled, he may receive more than $18million on 3 weeks based on this report. Another report said it was $20million for 17 days.

Regardless which of these figures is right, it's a lot of money. And I would have been glad to do the job for half that amount.

Now, as a free market believer, I say leave this up to the company. Don't buy stock in the company and don't do business with them. The free market works. However, in this case, that's not an option. WaMu is no longer in business. The losses (and extreme pay) will be passed on to JP Morgan Chase, who had no part in the talks. So what's a body to do?

Well, I DO NOT favor CEO pay regulation. Instead, I suggest writing to any company where you own stock and telling them how you feel about CEO pay. Also, research the directors of WaMu (or any other extreme company) and don't let them into any company you do business with. It's a lot of work, but I plan on doing some research along these lines.


Chuck said...

I differ on two things, though slight. One is I would like to see regulation on what a CEO can take from a company that is going under. I don't think there is anyway they can justify plundering a company and running out, leaving the workers with no jobs.

Second, I would like to see an investigation into why stock holders are not holding these CEO's accountable. This seems like too cozy of a relationship and since they are investing my retirement money, I would like to know they are looking out for my interests, not the CEO's.

Brooke said...

If a company is successful, then the CEO's pay is his and the stockholder's business.

WaMu, however, is an obscene picture of greed and swindling.

WomanHonorThyself said...

thanks so much for the tips and the visit to WHT..plz come more often!!:)

Katie Pennington said...

Ok, so somone had to take a pay demotion of several million to 60,000? Crazy! But I will say from experiance, you can live off of much less than 60,000 per year comfortably!

Randy said...

Chuck said he "would like to see an investigation into why stock holders are not holding these CEO's accountable."

A few years ago, new legislation made publication of CEO pay mandatory. The effect actually RAISED CEO pay. Seems companies wanted to brag that their CEO made more than the other CEO...

I wish I knew how to keep the board of directors in tow. I wish I knew how to fix this.