The attention given to the remuneration of chief executives is in danger of degenerating into a media circus.
At one level, it is understandable that minority shareholders are outraged at the staggering sums paid out to the chief executives of companies that have seen earnings reversals, losses or bankruptcy. But beyond the salary-envy, useful only for feeding media headlines, minority shareholders need to address urgently their own responsibilities.
They need to understand the excesses experienced in bubbles and their own culpability if they allow management to reward itself however it wishes.
The row over chief executives' pay, especially the issue of share options, is by no means a United States phenomenon. It is now legend in the US that Oracle's Larry Ellison collected a staggering US$700 million through stock options last year, a year in which his company's net profit fell nearly 60 per cent. What added to shareholders' irritation was the exercise of his options one month before a profit warning. But let's not single him out. Eye-popping packages were a widespread phenomenon, rewarding the good, the indifferent, and the ugly alike.
A recent US press article revealed the following figures: US$706 million last year for Mr Ellison; US$227 million for Cisco's John Chambers; US$127 million for IBM's Louis Gerstner Jr; US$101 million for Coca-Cola's Douglas Daft; and US$113 million for Tyco's Dennis Kozlowski.
A 'sexy' headline will get investors indignant. But it does not necessarily advance the cause of corporate governance. At best, it glosses over differences between chief executives and the issues involved in remuneration. At worst, it feeds a 'they're all blood-suckers' attitude among small investors towards corporate heads.