Is Reward for Failure Becoming the Norm?

New Republic Fat Cat sketch

“In most high-paying jobs, people are basically paid according to performance. When a film makes millions at the box office, the star of the movie can demand more for her next contract. . . . CEOs are different: They are almost certainly the only category of Americans who regularly get rewarded for failure with massive amounts of money.”

Nell Minow offers this withering critique of self-dealt CEO largesse in The New Republic. One example is Angelo Mozilo of Countrywide, the mortgage giant which helped bring the economy to the brink in 2008 as a result of their subprime mortgage activity. He resisted his board’s attempt to require more performance in his pay agreement, even getting them to throw in “subsidies for his wife’s travel on the corporate jet and for the associated taxes,” Minow added.

“When Countrywide finally revealed the massive losses it had previously obscured—the company had overstated its profits by $388 million and ended up paying $8.7 billion to settle predatory lending charges—Mozilo had made more than $103 million for the year.”

Minow is part owner and a board member of GMI Ratings, an independent research firm specializing in corporate governance. This analysis is gutsy for someone in the compensation business. “Among the top 50 corporations in the United States, the most extreme pay ratio, according to the compensation data firm, is 1,737 to 1. That salary belongs to Stephen Hemsley, the UnitedHealth Group CEO, who received nearly $102 million last year.”

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