Executive Compensation, CEO Firings, Blah, Blah, Blah

Two articles in the Wall Street Journal caught my eye recently. One dealt with shareholder efforts to rein in excessive executive compensation. The other focused on a rise in CEO firings. Both happenings result from our dreadful economy. One might think that meaningful corporate change is finally going to occur. Don’t count on it.

Shareholders are upset that executives are being paid millions while their companies are tanking. Some shareholder groups are pressuring boards of directors to take action. Some shareholder groups are proposing resolutions to be voted on in shareholder meetings.

The payment of huge executive comp during huge company losses doesn’t seem fair. It doesn’t even make sense. But some boards have asked the Securities and Exchange Commission to block shareholder votes on executive compensation resolutions, because they usurp the duty of the board. And the SEC has agreed.

Reality is difficult. Members of most boards are CEOs themselves. Allowing shareholders to set compensation for one company has implications for other companies. Shareholders can vote out obstinate board members, but the executive team and the board ordinarily control enough stock to prevent that.

In bad times, some boards do finally turn on the CEO and other executives. We’re seeing some of that now (John Thain at Bank of America, for example), but CEOs replace CEOs, so the next CEO is pretty much paid the same.

Unless the economy completely collapses (a bad thing for all of us), executive compensation isn’t going to materially change, and the basic makeup of CEOs will remain the same. So, again, life is sometimes unfair, and it sometimes makes no sense. That’s not to say that HR professionals shouldn’t try to be fair and make sense. You may even make some progress. If you do, it’ll offset somewhat the frustration that’s inevitable.