Unconscionable Executive Pay

Posted on March 19, 2008 by John Hunter

WaMu: Skip customers; save the execs

Since last summer, the company’s shares have lost nearly 80% of their value. But the bank is a softy when it comes to bonus pay for top brass. After CEO Kerry Killinger and other top executives missed all or a big part of their bonus pay last year, Washington Mutual wasted little time taking steps to apparently make sure it won’t happen again — even if the mortgage market and the company remain in the tank.

The board decided in February to use different performance yardsticks that could make it look like Killinger and other top executives were doing great jobs — and all but ensure them millions of dollars in bonuses for 2008. Those huge losses piling up because of subprime loans and foreclosures? At bonus time, the bank will ignore them.

The behavior of executives that take what they have no right to in unjustifiable pay schemes continues to be a disgrace. Thankfully more people are shedding light on the unconscionable behavior. Excessive executive pay is both a sign of awful ethics and a driver of bad management action. I add two new diseases of western management to Dr. Deming’s 7 deadly diseases; massively overpaid executives is one.

Related: Tilting at Ludicrous CEO Pay – Obscene CEO Pay – “Too often, executive compensation in the U.S. is ridiculously out of line with performance” Warren Buffett

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6 Responses to Unconscionable Executive Pay

  1. Mark Graban says:
    March 20, 2008 at 10:50 am

    It’s definitely demoralizing to their employees. Wouldn’t make them say “whoo-hoo!” as their TV ads say.

    Sounds like less of a “performance incentive” (if that worked anyway) and more of an entitlement. If a “bonus” is guaranteed, basically, isn’t that salary, and aren’t there important tax implications to the company? At what point is that sort of behavior considered fraudulent?

    I don’t think the “visibility” into this problem is really leading to any significant change. Maybe you need to start prosecuting folks and set some examples.

  2. Scott says:
    March 21, 2008 at 5:32 pm

    To fix the housing situation the normal american needs to make more money.
    How to do this? Pay our executives the same pay rate they would earn in asia
    or europe. Take the extra “winnings” and give the normal person a pay raise.
    The housing bubble ATM hid the fact that the average american income has not been rising
    with the cost of living.

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