$17,000 an hour...

Nicholas D. Kristof: $17,000 an hour. No success required.

By Nicholas D. Kristof

Thursday, September 18, 2008

Are you capable of taking a perfectly good 158-year-old company and turning it into dust? If so, then you may not be earning up to your full potential.

You should be raking it in like Richard Fuld, the longtime chief of Lehman Brothers. He took home nearly half-a-billion dollars in total compensation between 1993 and 2007.

Last year, Fuld earned about $45 million, according to the calculations of Equilar, an executive pay research company. That amounts to roughly $17,000 an hour to obliterate a firm. If you're willing to drive a company into the ground for less, apply by calling Lehman Brothers at (212) 526-7000.

Oh, nevermind.

I'm delighted to announce that Fuld (who continues to lead Lehman since it entered bankruptcy proceedings this week) is the winner of my annual Michael Eisner Award for corporate rapacity and poor corporate governance. The award honors the pioneering achievements in this field of Eisner, the former Walt Disney chief.

This isn't a plaque that will simply gather dust in a closet. It's a shower curtain to commemorate the $6,000 one that the former CEO of Tyco purchased and billed to his shareholders.

So, Fuld, you'll be pleased to know that I've picked out a lovely green vinyl number for you. Only $14.99! Why, I saved you $5,985!

Perhaps it seems frivolous to be handing out shower curtains to chief executives when we're caught in a deepening economic crisis.

Well, it is.

But one of our broad national problems is rising inequality, and it is exacerbated by corporate executives helping themselves to shareholders' cash.

Three decades ago, CEOs typically earned 30 to 40 times the income of ordinary workers. Last year, CEOs of large public companies averaged 344 times the average pay of workers.

John McCain seems to think that the problem is that CEOs are greedy. Well, of course, they are. We're all greedy. The real failure is one of corporate governance, which provides only the flimsiest oversight to curb the greed of executives like Fuld.

"Compare the massive destruction of wealth for shareholders to what he gets at the end of the day," said Lucian Bebchuk, the director of the corporate governance program at Harvard Law School.

A central flaw of governance is that boards of directors frequently are ornamental and provide negligible oversight.

As Warren Buffett has said, "in judging whether corporate America is serious about reforming itself, CEO pay remains the acid test." It's a test that corporate America is failing.

These Brobdingnagian paychecks are partly the result of taxpayer subsidies. A study released a few weeks ago by the Institute for Policy Studies in Washington found five major elements in the tax code that encourage overpaying executives. These cost taxpayers more than $20 billion a year.

That's enough money to deworm every child in the world, cut maternal mortality around the globe by two-thirds and also provide iodized salt to prevent tens of millions of children from suffering mild retardation or worse. Alternatively, it could pay for health care for most uninsured children in America.

Do we truly believe that CEOs like Fuld are more deserving of tax dollars than sick children?

Perhaps it's understandable that CEOs are paid heroically when they succeed, but why pay prodigious sums when they fail? E. Stanley O'Neal, the former chief of Merrill Lynch, retired last year after driving the firm over a cliff, and he walked away with $161 million.

The problem isn't precisely paychecks that are huge. Baseball stars, investment bankers and hedge fund managers all earn obscene sums, but honestly - through arm's-length transactions. You and I may gasp, but that's the free market at work.

In contrast, boards pay CEOs after negotiations that are often more like pillow talk. Relationships are incestuous, and compensation consultants provide only a thin veneer of respectability by finding some "peer group" of companies so moribund that anybody shines in comparison.

The result is what critics call the Lake Wobegon effect, which miraculously leaves all CEOs above average. Indeed, one study of 1,500 companies found that two-thirds claimed to be outperforming their peer groups.

John Kenneth Galbraith, the great economist, once explained: "The salary of the chief executive of a large corporation is not a market award for achievement. It is frequently in the nature of a warm personal gesture by the individual to himself."

There are widely discussed technical solutions to CEOs overpaying themselves that we should move toward. We can also learn from Britain and Australia, which offer shareholders more rights than in America, redrawing the balance between shareholders and management and curbing pay in the process.

As for Fuld, unfortunately, he had no comment for this column. At $17,000 an hour, it probably wasn't worth his time.

New Game...



It used to be that when I was feeling blue i'd go online and check out how crap the weather was in London, or some other hell hole, and that would cheer me up.

Now I go online and convert the total of my hard earned Euro savings account into dollars, and suddenly I'm rich !





x

Down down, deeper and down...




When I arrived India was gearing up for Diwali, the 'festival of light', a celebration involving gifts, sharing meals and exploding large amounts of firecrackers. But the firecrackers weren't the only thing exploding as Sensex, India's stock exchange, hit the 20,000 mark for the first time ever.

India's economy is booming and it has no problems justifying its position in the 'BRIC' (Brazil, Russia, India & China) group of future power nations, who are already muscling in on the traditional super economies. Yet I don't think the Sensex's record high made it on to many pages or websites around the world- perhaps because they're all too busy reporting on the continuing demise of the dollar...

This weekend's IHT ran a cover story on the difficulties faced by US expats in Europe and Asia who are dependent on dollar salaries, pensions or client bases and gave plenty of examples of belts being tightened or sticks upped and moved to countries where the living costs were lower. Whilst India and its BRIC allies become richer the dollar earning expats are significantly poorer now than they were a year ago, and at present there are few glimmers of hope on the horizon.


I noticed back in 2004 when I was last in India that Euros and Pounds were easier to change than dollars and saw further proof of the situation in S. America earlier this year when Euros, Pounds and even Swiss Francs were prefreable to dollars. For this latest trip I made the decision to travel only with Euros, a decision the Indian government backed up by refusing to accept dollar payments for entry to many of the countries tourist sites:

'The Ministry of Culture has begun insisting that tourists visiting the country’s monuments, including the Taj Mahal, pay the entrance fees in rupees rather than in dollars. Entrance to many sites for foreign tourists is priced in dollars and then converted to rupees, but the ministry has been losing tourism revenue as the dollar slid more than 12 percent this year against the rupee.' NY Times, 17 Nov 07

It's not just the Ministry of Culture that's refusing dollars... I heard a tale of beggar in Kolkata turning up their nose and walking away from a woman who offered her dollar bills!

As some Indian's and expats take all necessary measures to protect their revenues those earning Pounds and Euros are cashing in on their currencies strength and flexing their purchasing power by jetting off to the US to do their Christmas shopping:

'“Your money just keeps on going,” said Ms. Dragonette, awed at the buying power of her British pounds, each worth $2.03 at the time.

The dollar was so weak, said her cousin, a 27-year-old nurse, “We had trouble spending all our money.” Add a new superlative to New York’s long list: world’s most fabulous discount mall.

With the dollar near its lowest rate against the pound in 26 years, and its lowest rate against the euro ever, many Europeans are looking at the United States the way some Americans have long viewed Latin America and the Caribbean and, once upon a time, Europe — a cheap place to flex their strong currency. ' NY Times 15 Dec 07

At least the US hotel and retail economy would appear to be profiting from the dollars doldrums...

Who knows how long the dollar will continue to devalue... in the meantime if you're thinking of traveling to India, or anywhere else on earth for that matter, forget those greenbacks - they're not worth the paper they're printed on!