CEO Compensation: The Debate Heats Up
By: Home Depot's Bob Nardelli's $210 million golden parachute has renewed the buzz about CEO compensation. Is huge CEO pay justified? On today’s "Morning Call" – both sides "slugged" it out.
Yaron Brook, President and Executive Director of the Ayn Rand Institute feels that huge pay packages are necessary to attract a top notch CEO.
Brook says, “We live in a global economy. The job of the CEO is incredibly complex, incredibly difficult, incredibly competitive.... Shareholders want performance they’re willing to pay for it. What we need to remember here is that this is shareholder business.”
Rob Cox, U.S. Editor of Breakingviews.com believes board directors are not taking their jobs seriously enough when it comes to executive compensation.
Cox says, "Pay has got to be calibrated to the performance of the company. If you look at the $210 Nardelli got – it was the deal that was handed to him in 2000 (when Nardelli was hired). They don’t have to pay him a $20 million severance. I don’t think anyone could argue (for paying) $20 million for failure – to a guy who oversaw a company that lost $24 billion in market value during the 7 years that he ran it.”
CNBC's Erin Burnett said, "Rep. Barney Frank (the new Chair of the House Financial Services Committee) is proposing legislation that would require shareholder approval of pay and benefit packages. What do you think of that?"
Cox replied: We do think shareholders need to get more involved. They need to hold Directors more accountable. But I don’t agree with what Barney Frank is proposing, if he’s proposing a binding legislative vote on pay."