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Spare A CEO A Dime? Strong Exec Packages Are Necessary

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Did you hear the joke about the Wall Street CEO who made as much as $20 million for 18 days of work? Oh, sorry, it’s not a joke!

Alan Fishman got a $7 million signing bonus for agreeing to take the helm of troubled Washington Mutual and he’s in line to get another $13 million in severance now that JPMorgan Chase will likely fire him after its acquisitionof WaMu.

Fishman is just the latest in a years-long line of CEOs who seem to get enriched regardless of their contributions. Little wonder many on Capital Hill worked to restrict CEO compensation and golden parachutes as they were wrangling over the giant bailout last week. And no wonder Main Street America is on the warpath against Wall Street CEOs. Can the rest of us garden variety CEOs be far behind?

Schadenfreude is gripping the nation
Many of us have watched the financial wizards racking up huge bonuses,buying up weekend homes and vacation homes, and cruising around in their Lamborghinis and Maseratis.

It didn’t seem fair considering that most felt we were working harder and getting paid less. That’s why the recent news of diminished fortunes among Wall Street executives (Alan Fishman aside) is often met with glee rather than sympathy. I often hear complaints about who is creating something of value (“us”) and who is not (“those Wall Street guys.”) But lest we become consumed with schadenfreude let me point out that guilt by association may not be far behind.

Right about now, I’m guessing that a lot of rank-and-file employee, loyal shareholders and frazzled investors think that if they’ve met one CEO, they’ve met them all. That means we are in for a bumpy flight. So I am prepared to take one for the team - to throw my body in front of the train for CEOs (and CEOs-in-waiting) everywhere.

    • JPMorgan Buys Failed WaMu Assets for $1.9 Billion
    • National City Drops 52% as Market Wonders Who's Next
    • Citigroup to Buy Wachovia's Banking Operations

In defense of CEO compensation
If we are doing what we’re supposed to do, a CEO is uniquely positioned to make difficult decisions because she has a tremendous depth of knowledge about the business and its challenges and competition. Moreover, the CEO needs to know everything that is going on in every sector of the business. Even the CFO doesn’t have the same visibility. And other than a COO or CIO, nobody in a typical company has anywhere near the breadth of awareness as the CEO.

But this is a lot of responsibility. The successful CEO has to make sure to remain aware of crucial information which direct reports are sometimes motivated to obscure. The CEO has to know what is true and what is not. And then, the CEO has to decide and to act. Often, that means betting the ranch (or at least a bunch of acres) on one direction or another. Smart shareholders should want their CEO to be highly motivated to take calculated risks to make the business succeed. But not all decisions will work out, as we know, and lifetime tenure is a thing of the past.

In this age of technology and turmoil, good CEOs not only end up working 24/7/365, they are vulnerable to being fired at the drop of a hat (or a stock).

If Boards and shareholders want top talent to continue to step up and embrace the lonely, challenging and difficult job of CEO, strong compensation packages are necessary. Often that means a severance package that emboldens the CEO to take smart risks.

CEOs should not be rewarded for failing and they should be incentivized to succeed. There’s no doubt the scale of these packages has catapulted out of control at many Wall Street firms and quite a few large public companies. Those shareholders, and now taxpayers, asked to support bailouts, have a right to be outraged and to ask for reform and limits. But on behalf of hard-working CEOs (and future CEOs) across the broad spectrum of productive businesses in this country, I ask that we not throw out the baby with the bathwater.

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Erik Sorenson is chief executive officer of Vault.com, Inc. Mr. Sorenson, 52, oversees the strategic direction of the global, New York-based media company. He is widely regarded as an expert on media strategy and industry trends, with experience spanning radio, local and network broadcast television, cable and syndicated TV, and the Internet. From 1998 through 2004, Mr. Sorenson served as president of the MSNBC cable news channel. He has won more than twenty Emmy awards as a writer, producer, and television executive.

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