May 17, 2010
Bud Crystal Says Pay-for-Performance Ain’t Happening
– Broc Romanek, CompensationStandards.com
Here is an excerpt from this Bloomberg article:
Kenneth Feinberg, the paymaster at companies rescued by the U.S. Treasury, recently cut cash compensation for executives at American International Group Inc. and General Motors Co. He said some companies are buying into his credo of pay tied to performance.
Pay expert Graef Crystal, a former adviser to Coca-Cola Co. and American Express Co., has concluded that pay for performance is a fiction. In a study for Bloomberg News, Crystal examined the compensation of 271 chief executive officers and found the average slipped 4.7 percent last year to $9.95 million, with extremes ranging from $43.2 million for CBS Corp.’s Leslie Moonves to $245,322 for Google Inc.’s Eric Schmidt.
Using formulas he developed over 30 years in the business, Crystal crunched the numbers to see whether higher shareholder returns, the gold standard of performance for investors, led to higher pay, and vice versa. No matter how he sliced the data, the answer was no.