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Nardelli Proves That CEO/Worker Compensation Disparity is Alive and Well
This morning, Bob Nardelli, the chairman and CEO of The Home Depot, abruptly resigned after posting big profits, but poor stock performance. http://biz.yahoo.com/ap/070103/home_depot_nardelli.html?.v=6 He recently came under fire for his hefty salary, which The American Federation of Labor and Congress of Industrial Organizations listed as $37,862,312 in 2005. http://www.aflcio.org/corporatewatch/paywatch/ceou/database.cfm?tkr=HD&pg=1. His reward? A severance of $210 million.
Nardelli’s severance and salary are indicative of the need for a reasonable and fair compensation system for executives and workers to create long-term corporate value. However, since 1990, there’s been a dramatic increase in the ratio between the compensation of executives and their employees, creating an unfair and wide disparity. According to United for Fair a Economy, CEO pay jumped more than 500 percent between 1990 and 2003 while workers’ pay held somewhat steady. http://www.faireconomy.org/research/CEO_Pay_charts.html
These executive pay excesses come at the expense of shareholders as well as the company and its employees. Excessive CEO pay takes money from shareholders and is fundamentally a corporate governance problem.
Ultimately, shareholders have to be able to trust their boards of directors to set responsible CEO pay packages. Until corporate boards are held accountable, CEOs will continue to influence their own compensation, and the CEO/worker disparity will continue to flourish.
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