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Rewards without results
March 19, 2008 - Kevin Sweeney
It is frustrating to read about the unprecedented actions being taken by the Federal Reserve Board last weekend to facilitate the buyout of investment banker Bear Stearns Companies to J.P. Morgan Chase & Co.
Bear Stearns was one of the major players in the subrime mortgage market. It got caught in the mortgage crisis, and the Fed stepped in to help guarantee its debts, allowing it to be sold for $2 a share rather than have it utterly collapse.
This is a company who's stock sold for $170 a share last year, buoyed up, no doubt, by its risky mortgages.
What is most frustrating for me, however, is reading that Bear Stearn's former CEO, James Cayne, collected $40 million in compensation in 2006 (according to Star Tribune Business columnist Neal St. Anthony).
It never ceases to amaze me how the CEO of some company can collect huge amounts of money in stock options while steering the company on a course destined to run it aground.
It seems to me these top executives are more concerned with the company's stock price than the product the company produce, whether it produces widgets or cars or home mortgages. These CEOs don't take a job, it seems, without first negotiating a contract that promises to pay them a huge severance package if they should be ousted.
It's like they are setting up a big reward for their anticipated failure.
It would be nice to see a CEO's compensation based on something like productivity, efficiency, employee morale and company success, rather than how high they can jack up the company's price per share in the stock market.
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