Salaries and Executive Compensation

Don Marquis. “When a man tells you that he got rich through hard work, ask him: ‘Whose?’”

I’ve been thinking about salaries and wealth quite a bit recently. There is something galling about seeing executive compensation at times exceed millions of dollars a year when the company is going bankrupt, or seeing how some executives have been loaned tens of millions of dollars, or in the case of Bernie Ebbers of MCI Worldcom, $366 million, from funds that should go towards the business. Why would anyone want to invest in a company whose board of directors is so callous to its fiduciary responsibilities.

Yet, I’m also a conservative and a capitalist. I love to see people become millionaires through the application of their creative minds, their ability to lead a team, their determination and drive.

And I am sensitive to the fact that it often takes specialized leadership skills and courage to lead in the face of impossible odds. How much do you pay someone willing and able to turn a company around? I don’t know, but I do believe that it is best when done with rewards for measurable performance, ideally publicly disclosed for a public company. Instead, we often see huge bonuses paid when the company has done worse that it had before. In addition to more transparent accounting procedures, as an investor I’d like to see more transparency in the setting of executive compensation.