Risk Without Return,
Pay for Non-Performance
An out-of-town visitor was being shown the wonders of the New York financial district. When the party arrived at the Battery, one of his guides indicated some handsome ships riding at anchor. He said, “Look, those are the bankers’ and brokers’ yachts.” “Where are the customers’ yachts?” asked the naïve visitor.
–Fred Schwed, Jr., “Where Are The Customers’ Yachts?” (1940)
After a decade-plus of stagnant stock prices — during which time CEO pay has leapt 200%, to an average $10 million annually at the Fortune 500 — that seems a fair 
question to ask.
The inescapable conclusion?
Clearly, management — not shareholders — sets compensation at publicly-traded corporations.
Nell Minow and many others liken this practice to “grading your own exams.”
Pay For Non-Performance
Observation #2: the link between executive pay and shareholder returns, which supposedly justified exorbitant pay all throughout the ’90’s bull market, is an elaborate sham.
In reality, CEO pay is a one-way ratchet that only goes up, not down, regardless of shareholder returns.
Anyone on this at the SEC? Congress?
Anyone??
