Magazine article American Banker

Weill's Package Illustrates Need for CEO Pay Disclosure

Magazine article American Banker

Weill's Package Illustrates Need for CEO Pay Disclosure

Article excerpt

Last week President Bush signed into law what he glowingly described as the toughest corporate reform bill since the FDR era, but missing from this landmark legislation were any guidelines on excessive CEO pay.

Corporate greed and excessive executive compensation caused the demise of Enron, WorldCom, and Global Crossing and cost shareholders, employees, and customers billions of dollars.

President Bush and Federal Reserve Chairman Greenspan have spoken against what Mr. Greenspan characterizes as "infectious greed," and blamed it for those financial disasters and the current decline in the market. SEC Chairman Harvey Pitt and the New York Stock Exchange have identified excessive executive pay as a cause of investor skepticism.

A prime example of excessive CEO pay is the compensation of Citigroup Inc.'s Sandy Weill. The New York Times recently reported that Mr. Weill received over $1 billion during the last decade.

If it weren't for the Times' report, no one would know Mr. Weill's true compensation, nor its significance. No Securities and Exchange Commission report or Citigroup annual report gives any hint of this billion-dollar compensation package. No official report compares this with corporate philanthropic giving; for example, Mr. Weill's annual compensation has generally exceeded Citi's corporate philanthropy by a ratio of three to one.

No official report provides any data on the ratio of Mr. Weill's or any other CEO's pay to that of the average American worker or a company's average employee. At Citigroup, the CEO compensation package is generally in the area of 3,000 times that of the typical bank teller.

Nor does any official report place CEO compensation in the context of the number of employees without health-care benefits or the relatively modest costs of providing health care for all workers. At Citigroup, the estimated cost of universal health care for all workers is likely to be less than 5% of the total compensation packages for its five top executives listed in its SEC 10-K report.

What may be needed to control excessive executive compensation is a nonlegislative moral compass for CEOs and their executive compensation committees. Neither legislation nor regulation alone can effectively replace a moral compass.

Consider, for example, the utter failure of President Clinton's corporate tax penalty on salaries of more than $1 million a year. It was subverted by bogus performance bonuses and excessive stock options, neither of which was considered part of the $1 million Clinton salary cap.

The ideal leaders to develop such a moral compass would be President Bush, Treasury Secretary Paul O'Neill, and Mr. Pitt, with support from Mr. Greenspan and the investor Warren Buffett. …

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