Tuesday, April 28, 2009

Corporate Greed Is Alive and Well in America.

Some people, particularly CEOs, but not necessarily limited to them, seem to have paid no attention to what happened to the American economy during the past few years. Recently, the shareholders of the Chesapeake Energy Corp. protested the $100 million plus compensation package that Chairman and Chief Executive Aubrey McClendon received during the past year. This occurred at a time when the shareholders lost significant value as the price of the stock decline during the year.

There was a national uproar when AIG attempted to pay out $160 million in bonuses. This total is only slightly more than 50% higher than what one man, the chief executive of Chesapeake energy, was going to receive. An article in the Huffington post recently stated that, "First, the Congress and administration needs to establish some definition of "excessive." Let us say that it is total compensation in excess of 30-fold (or 25-fold, or 65-fold, or some other number) the average worker in that firm, or some higher multiple of the lowest quintile, or some other number. Something. This would be the major argument, but something can be agreed."

I disagree. Each company should establish corporate pay. Congress has no business regulating salaries of people in the private sector. However, due diligence is required of the boards of directors so that the CEO salary is appropriate to his/her performance during the past year as well as the increase or decrease in the value of the shareholders equity. However, when a CEO receives 2000% more than the average worker for the corporation it is obscene. While it is often argued that private companies have the right to pay whatever they want; this should not apply when the so-called private company is actually a public company with shareholders.

It is a bad time for corporations to be validating Gordon Gecko's infamous statement, "Greed is good."

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