For those interested in following the latest in executive compensation, you might find interesting todayâ€™s New York Times story on Lee Raymondâ€™s retirement package at Exxon.Â The Times values the package at $398 millionâ€”one of the largest payouts ever (the top payout being the $550 million paid to Michael Eisner in 1997).Â Among the retirement perks include Exxonâ€™s continued payment of Raymondâ€™s country club fees, use of the company aircraft, and a one-year consulting gig (paying $1 million).Â Â Not surprisingly, the Times is quite critical of the arranagement.Â
Given that Exxon reported the largest annual corporate profit in history last year ($36 billion), the package seems at first blush plausibly more defensible than a number of packages the Times has criticized of late.Â In any event, Iâ€™m hardly in a position to pass judgment on its merits.Â (Of course, as an investor in Vanguardâ€™s 500 Index Fund, I probably should at least try:Â Vanguard holds 1% of Exxon, meaning I paid almost a dollar towards Raymondâ€™s payout.Â Hey, Lee, the next 1/3 gallon of premium is on me!)
What I find interesting is that Exxon was all too willing to payâ€”and defendâ€”the package given the virtual certainty it would get slammed in the press.Â This is not the time for Fortune 50 companies to slip over-sized executive pay packages into the back of a proxy statement.Â Â They will get noticedâ€”and publicized.Â All of this seems to confirm the comments of Charles Elson of the University of Delaware that additional disclosure of executive pay â€œis like aspirin; it can make you feel a little better, but it can’t even cure the common cold.â€?Â In an interview in last Sundayâ€™s Times, Elson elaborated on this statement in the following exchange:
Q [Times]. Public humiliation has been an effective tool ever since the Pilgrims and the public stocks. Why don’t you think that disclosure of excessive pay will make executives think twice before demanding it and directors think three times before granting it?
A [Elson]. Anyone who isn’t embarrassed to ask for $100 million isn’t embarrassed if it is disclosed. And directors assume that shareholders think of the board as a group of generic directors, and will get mad at the board as a whole for signing off on the package, rather than try to assign blame to a specific name.
Itâ€™s almost as if he were anticipating Exxonâ€™s announcement.