Thanks, but I don't want a golden parachute
There was no quid pro quo. The board was kind enough to give me a restricted stock grant in 2003, and then this year they gave me a restricted stock grant as well.
When I talk to folks lately they use the phrase "tone deaf" to describe boards that hand out big executive pay packages. Do you see signs of tone-deafness on corporate boards?
Not on the boards that I've been a part of. I think there are certain examples out there which have unfortunately created an aura around executive compensation which isn't positive. So I think anything those of us can do to generate a perception of reasonableness is helpful. I don't want, though, to get to a position where people confuse reasonable compensation under all the circumstances irrespective of whether it may be large, with greed, when in fact that compensation is just a reward for positive performance. . .
Something like Exxon?
Exxon is a very good example.
Surveys show executive pay is rising much faster than inflation and earnings.
But the stock prices of most of those companies are going up. Because market values have gone up, because deals have gotten larger, people have gotten paid more, and it has gotten to the point that some numbers, in fact, seem to shock the conscience. But I'm not sure it would be a positive development if people allowed themselves to react purely to the nominal numbers, because that is a very slippery slope. How much is too much? What has made America great is the fact that it has regulated but generally free markets. My own view is that the other thing that has made it great is the opportunity to generate wealth.
People have been screaming about executive pay for 15 years.
More intensely lately. Some of it has been driven by certain graphic examples we've been talking about. The other piece of it has been the huge scandals in which people have been able to extract wealth before the firm collapsed, which has generated a sense of inequity.
You're talking about a WorldCom or Enron?
Precisely. The other cases are from the tech boom, which was ridiculous, in my view. There were people there who were able to extract great wealth as others were left with zero. You look at that and say to yourself, basically, how is it that this guy had all these options and was able to cash them in and walk away with a couple hundred million dollars, and we have zero because the firm wasn't really valuable? I think if you combine the scandals with the tech bust, that has generated a heightened sense of inequity with respect to pay.
One of the complaints about option grants has been that they just reward survival. If you last five years, inflation is going to make them vest. When you are on compensation committees, do you try to adjust those for outpacing the S&P 500?
Not generally. When we look at options, we want the stock to go up. We're not smart enough to figure out why or why not. To the extent it does go up, shareholders have done well, too. As you know, there has been a big shift away from options. A lot of people have applauded that. Trust me when I tell you that the reason for that is that you now have to expense options. We have always expensed options here. So when certain tech-firm executives say they can expense options and pay for them or they can take restricted stock, which has an assured value, they are going to take restricted stock all day because they've got guaranteed value. With an option, you've got zero value on Day 1. With restricted stock, you've got the value of the stock. Trust me, it wasn't moral. It was economic.
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