Sunday, October 15, 2006

How CEOs justify their pay

Ever wonder how CEOs of big companies justify paying themselves millions? The NY Times reports:
From 1970 to 2000, according to a Harvard study, the median compensation awarded to the three highest-paid officers at major American corporations rose to $4.6 million from $850,000. More recently, that figure has settled down to around $4.35 million. ...

Since its founding in 1973, Mr. Cook?s firm has served more than 1,800 clients, including more than half the world?s 250 largest corporations. The firm, privately held, employs 50 people; it is based in New York and has offices in Chicago, Los Angeles, San Francisco and London. Cook & Company engineered compensation innovations that other consultants and corporations have emulated, innovations all made palatable by an argument that Mr. Cook propagated to justify this huge transfer of wealth to chief executives: that newfangled pay packages aligned the interests of shareholders and management.
Some clown named Frederic W. Cook figured out that if he recommends that companies pay their top executives obscenely large amounts of money, then all those companies will hire him as a consultant. Then they can justify the big payouts by saying that the consultant recommended them. Needless to say, Cook made a lot of money this way also.

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