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Ray Allegrezza

Many CEOs not worth their weight

October 10, 2013

In light of its recent Chapter 11 filing, Furniture Brands has been in everyone's crosshairs.

In particular, I've heard plenty of grumbling about the compensation levels of many of their executives, particularly in light of the corporation's steady financial decline over the years.

And while it is incredibly hard to understand fat bonuses linked to failing financial performance, studies suggest that in corporate America, this may be the rule rather than the exception.

This August, The Institute for Policy Studies released the 20th anniversary Executive Excess report indicating that nearly 40% of America's most highly compensated CEOs were not worth their weight in gold, much less their annual compensation packages.

In fact, the report's primary takeaway was that almost 40% of the country's highest-paid leaders eventually either ended up "bailed out, booted out or busted."

The Bailed Out were CEOs whose firms either went belly up or received taxpayer bailouts after the Great Recession of 2008. These executives, which represented 22% of the study, included executives like Richard Fuld of Lehman Brothers. According to IPS, Fuld enjoyed one of corporate America's largest 25 paychecks for eight years running - until his company failed in 2008.

Not counting those on the bailed out list, The Booted make up another 8% and represent CEOs who lost their jobs involuntarily. However, despite their poor performances, booted CEOs strapped on golden parachutes valued at $8 million.

The third category, The Busted, is made up of CEOs who ran corporations that ended up paying stiff fraud-related fines or settlements. This group, which made up 8% of the sample, had to make payments that totaled over $100 million per firm.

In the words of the report's co-author, Sarah Anderson, "This report should put an end to any remaining sense that we have ‘pay for performance' in corporate America."
Talk about the cost of failure.