Offers a fascinating look at CEO pay that notes the difficulty in determining exactly how (or why) the CEO is paid as (s)he is.
A look in:
"For researchers seeking to understand CEO pay, the opacity of some of these instruments is of practical interest. Salary and bonus payments are the least opaque; they are just cash payments. But even with these simple instruments, investors and researchers do not fully understand the incentives involved without better information. The way in which future wage and bonus payments depend on the performance of the executive is key, and such details are not usually disclosed: What leads to a salary increase or bonus payout, or the lack of one?"
Major Trends:
* more market-based pay
* within the market-based pay component, more restricted shares
(FYI This is perfect for my class and its regular assignment of analyzing two companies exectutive compensation practices)
NOTE: This not as an argument against high CEO pay (have made that before), but to show how a study is done influences the reported findings.
We've all seen the headlines of how CEO pay is rising so quickly.
First from the Economic Policy Institute's
Same article:
"The CEO-to-worker compensation ratio was 20-to-1 in 1965 and 29.9-to-1 in 1978, grew to 122.6-to-1 in 1995, peaked at 383.4-to-1 in 2000, and was 295.9-to-1 in 2013...."
and
"If Facebook, which we exclude from our data due to its outlier high compensation numbers, were included in the sample, average CEO pay was $24.8 million in 2013, and the CEO-to-worker compensation ratio was 510.7-to-1."
295.9 to 510.7 is a pretty big difference. The authors were justified to not include the outliers, but in dropping outliers we often drop valuable information at best and can influence findings at worse.
But even this, as Mark Perry points out in his May 2014 piece is misleading as the AVERAGE CEO pay (the all important numerator in the ratio) needs an asterisk: average of what? The average SP 500 firm? Average largest 200 firms? or average of all firms?
Why does it mater? Because when all CEOs are including (think "I am CEO of my own small firm"), the CEO pay is MUCH Much lower.
"According to the US Census Bureau, there aremore than 27 million private firms in the US, so the samples of 200-350 firms for CEO pay represent only one of about every 100,000 private firms in the US, or about 1/1000 of 1% of the total firms. And yet the AFL-CIO, AP and others compare the average annual wages of hundreds of millions of full-time employees working at the more than 27 million US companies to the CEO pay of executives at only several hundred companies, which is hardly a fair comparison.
We can get a more accurate and complete picture of CEO compensation in the US by looking at wage data released recently by the Bureau of Labor Statistics in its annual report on Occupational Employment and Wages for 2013. The BLS report provides “employment and wage estimates by area and by industry for wage and salary workers in 22 major occupational groups, 94 minor occupational groups, 458 broad occupations, and 821 detailed occupations,” including the occupational category “chief executives.” In 2013, the BLS reports that the average pay for America’s 248,760 chief executives was only $178,400."
"The study is among the first to assess how the rising popularity of performance-based restricted stock is affecting CEO pay. Performance-based stock is the fastest-growing segment of executive pay, accounting for 27.4% of the value of compensation granted to CEOs in 2012, up from 18.8% in 2008, according to a separate study by the Journal and pay consulting firm Hay Group.
So far, the results suggest that the trend toward performance-linked stock hasn't had a big impact on average pay levels."
Du, Waisman, Wang, and Zhou provide an interesting look at a topic that frankly I never considered: whether post employment non compete contracts in financial service firms are priced by market participants and whether the enforcement of these contracts is good for bondholders.
From the abstract:
"...this study examines whether and to what extent the capital markets recognize the risk associated with the mobility of human capital. We evaluate the state-by-state variations in the enforceability of noncompetition agreements in the United States to test the market-discipline hypothesis and find a significant negative relation between the degree of enforcement of noncompetition agreements and the yield spreads for bonds issued by financial institutions. We also find that the negative relation is more prominent for investment-grade bonds and bonds with long-term maturities. In addition, we find that investors care more about managerial stability when bond issuers have weak protection of shareholder rights."
From the paper:
"Noncompetition agreements can function as strong binding mechanisms that significantly increase managerial stability and reduce the mobility of human capital (Garmaise 2010). The legal enforcement of covenants not to compete varies widely across jurisdictions in the United States. For example, a majority of states allow and enforce noncompetition agreements as long as they are ―reasonable and necessary,‖ though California virtually forbids such covenants. This variation in legal enforcement provides a natural setting to apply the insights of the law and finance literature (La Porta et al. 1997, 1998).
This paper examines whether bondholders demand different yield spreads if the legal enforcement of noncompetition agreements affects the mobility of human capital. Following existing research (Morgan and Stiroh 2001), we collect data on new bond issues from financial institutions and document that the statewide enforcement level is negatively correlated with bond spreads, which means that investors do recognize the risk associated with the mobility of human capitals and price the risk accordingly. We also find that bonds investors care more about the managerial stability of financial institutions having weak protection of shareholder rights. "
Interesting.
Cite:
Du, Wei, Waisman, Maya, Wang, Haizhi and Zhou, Mingming, Do Bondholders Care About Managerial Stability? Evidence from the Financial Services Industry (June 18, 2011). Available at SSRN: http://ssrn.com/abstract=1885752
"Graef Crystal, a pioneer in compensation consulting, analyzed the 2009 pay of 271 chief executive officers. His findings? 'Simply put,' Crystal says, 'companies don't pay for performance.'
.... Crystal, 76, developed the formulas he uses over the course of 30 years advising companies....In an ideal world, Crystal and many investors agree, stock performance and CEO pay would be closely aligned. But no matter how he parsed the numbers, Crystal discovered no relationship between shareholder returns and CEO compensation."
Just a short post giving two very scary articles. Both suggest much more government intervention into the business world, which is the exact slippery slope we have been talking (and fearing).
"The WSJ provides a good example of the kind of shenanigans we should expect under a government-run car company. Despite GM's need to streamline operation and close facilities all around the country, Rep. Barney Frank was not pleased when it decided to shut down a Norton, Mass. warehouse...so he gave Fritz Henderson a call"
that employed 90 people...So he gave Fritz Henderson a call"
and then quoting the WSJ further:
"A CEO who refuses the offer can soon find himself testifying under oath before Congress, or answering questions from the Government Accountability Office about his expense account. To that point, Mr. Henderson spent Wednesday with Chrysler President Jim Press being castigated by the Senate Commerce Committee for their plans to close 3,400 car dealerships. Every Senator wants dealerships closed in someone else's state"
"The Obama administration plans to appoint a "Special Master for Compensation" to ensure that companies receiving federal bailout funds are abiding by executive-pay guidelines"
What makes this troubling is that can we really expect that "Special Master" will be leaving anytime soon? Or will the position become permanent? This is especially a concern given:
"The government is also pursuing a separate revamping of financial-sector rules that could change industry compensation practices more broadly. For instance, the Federal Reserve is considering rules that would curb banks' ability to pay employees in a way that would threaten the "safety and soundness" of the bank."
This semester we really had to rush through executive compensation (market conditions took up quite a bit of class time), so I want to make my classes (and by extension others) aware of some of the debate on CEO pay. So a special post on CEO pay.
First yes CEO pay is high and getting higher over time. But I really do not want to address that to much bust to say that the level of pay appears to be closely tied to firm size and I will ignore level of pay since I am not sure it matters as much as the popular press claims. For a nice review try Jensen, Murphy, and Wruck 2004 or this by BusinessKnowhow 2007.
An important paper that I do want to point out is from Jared Harris that suggests that despite of good intentions (I will give boards the benefit of the doubt), that stock options might actually make agency costs worst:
"At best, incentive compensation has an ambiguous relationship with firm performance that can reward executives for luck (Bertrand & Mullainathan, 2001), or encourage CEOs to manage their personal reputations rather than their organizations (March, 1984). Research indicates that current forms of managerial incentive pay do not effectively align the incentives of managers and shareholders; indeed, a number of studies have had difficulty showing any positive link between executive incentive pay and improved performance of the firm (e.g., Mishra, McConaughy, & Gobeli, 2000; Murphy, 1999), and some work suggests that high CEO incentive pay or perquisites may in fact decrease firm performance (Blasi & Kruse, 2003; Core, Holthausen, & Larcker, 1999; Yermack, 2006).
As a corollary to these troubling results about the disconnect between incentive pay and firm performance, it also appears that incentive alignment does little to alleviate concerns about malfeasance and self-dealing. While incentive pay is traditionally seen as an alternative to monitoring as a way to prevent managerial misconduct (Tosi, Katz, & Gomez-Mejia, 1997; Zajac & Westphal, 1994), empirical results do little to confirm the claim that malfeasance is reduced. Indeed, recent research (Harris & Bromiley, 2007) investigates whether large potential payoffs for managers – contrary to classically formulated incentive theory – do not supply an adequate incentive for the good management practices that scholars typically suppose, but rather provide an enticement to cheat, commit fraud, or otherwise cook the books in an attempt to fabricate the levels of corporate performance that will trigger the payoff."
Supposing for a moment that CEO pay is a problem for more than just jealousy reasons, what can be done? It appears that regulation and increased transparency may not work as well as more active shareholders. Two papers to back this claim.
First that active institutional shareholders do keep pay LEVELS lower. From 2003.
"Hartzell and Starks find that as institutional ownership goes up, the firm is more likely to use pay for performance plans. Additionally, the level of CEO pay tends to go down. These findings suggest that institutional investors make better monitors than ordinary investors do. Possibly more convincing however, (since it solves the endogenity problem which is that is the institutional investors may select which stocks that pay for performance and pay managers less) is their analysis that finds as managerial ownership goes up, pay goes down relative to control groups in the periods that follow."
and then the article suggesting regulation and transparency do not lower pay levels
"This paper reviews the history of executive compensation disclosure and other government policies affecting CEO pay, and as well surveys the literature on the effects of these policies. Disclosure has increased nearly uniformly since 1933. A number of other regulations, including special taxes on CEO pay and rules regarding votes on some pay packages have also been introduced, particularly in the last 20 years. However, there is little solid evidence that any of these policies have had any substantial impact on pay. Policy changes have likely helped drive the move towards more use of stock options, but there is no conclusive evidence on how policy has otherwise affected the level or composition of pay"
"When a corporate chief executive voluntarily forgoes a salary or takes $1 a year in pay, it’s largely symbolic in many cases, according to a report released by The Corporate Library.
In 41 companies where the chief executive had either no base salary or a salary of $1 for the year, as well as no cash bonus, 21 received some form of “all other compensation” payment, the study—of 2008 proxy filings—released Friday, April 17, found. And the 18 executives who voluntary went without base salary had a combined total of nearly $6 billion in company stock alone."
NOTE the correction from last night's class. Qualitatively nothing changes. The $6 billion figure respresents stock holdings of the 18 executives. Which is not a problem as far as I can see, but the article makes it seem like a bad thing.
Financial theory suggests that CEO compensation should be based on relative performance.
Why? It captures what financeprofessors like to call external shocks (for the rest of you this means that things that are beyond the control of manager). For instance if you are paid by stock, for better or worse you are at least partially at the mercy of the stock market. So essentially the peer group is a control group.
Surprisingly the empirical literature has found mixed results when examining how well this works. That seemingly has changed with a new paper by Ana Albuquerque. She suggests the the reason that previous researchers have used the wrong peer groups.
"External shocks and flexibility in responding to the shocks are functions of, for example, the firm's technology, the complexity of the organization, and the ability to access external credit, which depend on firm size. When peers are composed of similar industry-size firms, evidence is consistent with the use of RPE in CEO compensation."
A later look in:
"...difficulty in defining the ideal peer group. Such a group should include firms that are similar along several characteristics (e.g., industry, size, diversification, and financial constraints). Yet considering all such characteristics simultaneously is not practical because it could result in peer groups composed of too few firms, which would be too noisy to filter external shocks. In this paper, I show that industry and firm size capture many of these characteristics. When peer groups consist of firms within the same industry and size quartile, my empirical results show systematic evidence supporting RPE usage in CEO pay."
and to compare this to previous work in the field:
"To compare with previous studies,I test whether RPE is used when measuring peer performance with two common peer group definitions, namely, the S&P 500 index and firms within the same industry. I fail to find consistent evidence of RPE usage with either peer definition"
Good stuff. Interesting.
Cite: Albuquerque, Ana M.,Peer Firms in Relative Performance Evaluation(March 26, 2009). Available at SSRN: http://ssrn.com/abstract=1368893
"Despite crippling losses, multibillion-dollar bailouts and the passing of some of the most prominent names in the business, employees at financial companies in New York, the now-diminished world capital of capital, collected an estimated $18.4 billion in bonuses for the year.
That was the sixth-largest haul on record, according to a report released Wednesday by the New York State comptroller."
"President Obama branded Wall Street bankers “shameful” on Thursday for giving themselves nearly $20 billion in bonuses as the economy was deteriorating and the government was spending billions to bail out some of the nation’s most prominent financial institutions...."there will be time for them to get bonuses....Now’s not that time.”
I agree with most of the articles and the President but not for the fairness reasons (although as a signal to customers and employees accepting any bonus seems a horrible move) but rather because what a bonus is intended to do.
Bonuses are meant as rewards used to create the proper incentives. Bonuses that are paid regardless of performance do not do that. And yes I realize that bonuses are way down, but given their performance, they still seem too high.
If you take a second and examine compensation, there are two key things to consider: the level of pay (how much you pay people) and the form of pay (Salary, Bonus, market-based pay etc.). Each is important, but the form much more so.
Level of pay is what attracts and keeps employees (and yes even managers). In the words of Keven Murphy when I took his class, it is what "gets them in the door and what keeps them. Form of pay (and re-evaluations of the level of pay) is what creates incentives and helps to motivate people to do what we want them to do.
Don't think so? Consider this example directly from my class. Suppose you are hired as CEO of a firm and paid a straight salary of $2 million a year. You are told that the pay will never change so long as your firm does not go out of business and you can not be fired. How would you behave? Consider the many agency costs that may arise. Risk taking would likely be scaled way back, debts reduced, dividends and capital expenditures lowered since your main goal is to keep the firm in business so you get your $2 million annuity.
Bonuses and market-based pay are, at least in theory, designed to motivate the employee to do what is in the firm's (and more specifically the shareholders') best interest. For instance, stock options that increase in value with increasing volatility, are a means of making managers less risk averse. Bonuses are similar but more often based on non market factors (either accounting-based or performance based).
Which gets us back to the question of paying Wall Street executives bonuses. If the form of pay is to serve as a proper motivator (that is to motivate them to do what we want), something has to be at risk (Again go back to the example, if I say you get a $2 million bonus no matter how well you do, does it motivate you or is it just another word for salary?).
By any standard, most financial institutions have had a horrible year. To reward managers (which is essentially saying "Good job") is wrong. Indeed, a strong case may be made that the reason why bonuses have been so high over the past few years is not that the firms were doing so well, but that they appeared to be doing so well and the outcome of many of the investments had not yet been determined. Thus some ex-post settlement (IF I remember correctly it was Jensen and Meckling in 1976 who suggested this) whereby the executives give back past bonuses (and not just this year's) is really what should happen.
Now of course it is not going to. There is a movement afoot to get some of this year's bonuses back at firms who got government bailouts but even this faces very long odds.
As Garvey and Mibourn (2003) showed managers tend to get rewarded when things go right (good luck?) and yet are not penalized when things go wrong (bad luck?). I somehow doubt that this time around will be any different Charlie Brown will still end up on his back and managers will still look out for themselves and not shareholders.
In prepping for my MBA 610 (Corporate Finance) class where we examine executive pay and how it impacts agency costs, I found this article by Gavin Smith and Peter Swan.
Swim and Swan look at firms that do major investments and those that do not. They find that the way the CEO is paid does influence the investment behavior of the firms.
From the abstract:
"CEO incentives with option-based asymmetric payoffs greatly increase the likelihood that a firm will increase risk by undertaking both major real investments and acquisitions. In contrast, equity-based incentives that induce upside and downside symmetric payoffs are associated with fewer major acquisitions and neither encourages nor discourages real investments. Fixed pay is associated with low likelihood of major investments and a poorer prognosis.
When option-incentivized CEOs use equity for funding real investment decisions they have the best combination of incentives and funding source"
Which is really cool. It may not be the most ground breaking paper I have ever seen, but it definitely is worth the read! (If nothing else, read the 8 page introduction! In fact, if you are in my class, you should definitely do so :) )
Cite: Smith, Gavin and Swan, Peter L., "The Incentive to 'Bet the Farm': CEO Compensation and Major Investments" (23 February, 2008). Available at SSRN: http://ssrn.com/abstract=1009323
Tails I win, heads I don't lose? That seems to be the main point of the NY Times piece that looks at what has happened to some of the CEOs whose firms have most millions, err billions.
UNDER the stewardship of Dow Kim and Thomas G. Maheras, Merrill Lynch and Citigroup built positions in subprime-related securities that led to $34 billion in write-downs last year. The debacle cost chief executives their jobs and brought two of the world’s premier financial institutions to their knees.
In any other industry, Mr. Kim and Mr. Maheras would be pariahs. But in the looking-glass world of Wall Street, they — and others like them — are hot properties. The two executives are well on their way to reviving their careers, even as global markets shudder at the prospect that Merrill and Citigroup may report further subprime losses in the coming months.
and later the article cites examples from history that show the current trend is not new:
"Perhaps the most notorious example of failure leading to prosperity is John Meriwether. Ousted from Salomon Brothers in 1991 for his role in a bond trading scandal, he became a co-founder of Long Term Capital Management, the hedge fund that nearly collapsed in 1998, rattling markets worldwide. He has since founded a second fund, JWM Partners, with assets of around $3 billion. More recently, Brian Hunter, the energy trader at Amaranth Advisors whose disastrous bets led to the disintegration of that $9 billion hedge fund, is now advising a private equity fund called Peak Ridge on starting a hedge fund.
Notably missing in the article is Bear Stearn's Jimmy Cayne who resigned in large part due to Bear's losses.
Nice article on CEO pay from the Economist. The nutshell:
"The secret to sensible pay is transparency and a shareholder vote, along with all the negotiation that surrounds it....Ideally, the debate over executive pay will shift from the purely moral plane to the pragmatic one, where it really belongs. Investors and workers want their companies to generate prosperity. Pay is a tool to help that happen. Governments should not blunt it."
"Following an acquisition of another company, chief executive officers' compensation levels usually increase, even when the purchase turns out to be unprofitable, according to researchers at the University of Washington and University of British Columbia. That's because while a bad merger can decrease the value of a company's stock and options, CEOs typically acquire new stock options once the deal goes through, thus making up for any financial losses suffered as a result of the buy.
'There are major personal financial gains to be made by CEOs after any merger or acquisition so even if it ends up being a financial loss, shareholders suffer but CEOs nearly always come out ahead financially,' says Jarrad Harford, an associate professor of finance and business economics at the UW Business School and co-author of the study."
The paper, which is in the Journal of Finance, is of course very good. I read it a few years ago in working paper format--her is a copy of the paper.
Short version: while the pay gap gets much bad publicity, it is not entirely bad. The gap helps create incentives to work harder and get more education. Moreover, the gap is not some conspiracy, but rather brought about by some of the same forces (technology being paramount) that we see at work in large chain retail stores (the CEO of a large chain will get much more in real terms than the manager of a small chain would have in the pre-Wal Mart world), professional sports (superstars get paid much more than journey-man players), and many other facets of life.
""I think inequality in earnings has been mainly the good kind," Becker says. "I strongly believe it's been mainly the good kind."
How...?According to Becker, good inequality gives more rewards to people with more education, more skills and a greater ability to create value in the world.
"If you're in an environment where knowledge counts for so much, then if you don't have much knowledge, you're going to be a loser," Becker says."
The problem of course is if there are too many losers, they become a drain and a hindrance on the economy and everyone else. (See Bernanke's comments from two days ago: "the public at large might become less willing to accept the dynamism that is so essential to economic progress."
One group that is unlikely to get much sympathy but who suffer a very large pay gap is the professional athlete in the minor leagues. For instance, NPR looks at the NBA developmental league and finds many of their players make a small fraction of what NBA superstars make.
"With an average annual salary of more than $5 million, NBA players are the highest-paid athletes in professional sports. But for the many skilled professionals who haven't quite made it into the NBA, the financial gulf is huge.
Overall the pay gap is a tough problem to deal with: on one hand you need incentives, but on the other, those who do fall behind need a second chance to recover. This second chance can come through education that lifts them up and not regulations that hold the top achievers down.
(BTW lest you think that this is just some liberal academic speaking who just does not want there to be a pay gap, remember I am also GENERALLY in favor of rewriting underwater executive stock options. It is not about the winners and losers, but about improving incentives.)
Today Fed Chairman Ben Bernanke gave a speech on the issue. The text of the speech is here.
Some Look-is:
* "Although we Americans strive to provide equality of economic opportunity, we do not guarantee equality of economic outcomes, nor should we. Indeed, without the possibility of unequal outcomes tied to differences in effort and skill, the economic incentive for productive behavior would be eliminated, and our market-based economy--which encourages productive activity primarily through the promise of financial reward--would function far less effectively."
* "....the average standard of living in this country has improved considerably over time. However, by many measures, inequality in economic outcomes has increased over time as well, albeit at varying rates."
*"In real terms, the earnings at the 50th percentile of the distribution (which I will refer to as the median wage) rose about 11-1/2 percent between 1979 and 2006. Over the same period, the wage at the 10th percentile, near the bottom of the wage distribution, rose just 4 percent, while the wage at the 90th percentile, close to the top of the distribution, rose 34 percent. In 1979, a full-time worker at the 90th percentile of the wage distribution earned about 3.7 times as much as a full-time worker at the 10th percentile. Reflecting the relatively faster growth of wages of higher-paid workers, that ratio is 4.7 today."
*"Indeed, substantial economic benefits may result from any form of training that helps individuals acquire economically and socially useful skills, including not only K-12 education, college, and graduate work but also on-the-job training, coursework at community colleges and vocational schools, extension courses, online education, and training in financial literacy. The market incentives for individuals to invest in their own skills are strong, and the expanding array of educational offerings available today allows such investment to be as occupationally focused as desired and to take place at any point in an individual's life."
"Bolstering education and training -- rather than erecting trade barriers -- would help narrow the economic gap between low- and high-income workers, Federal Reserve chairman Ben Bernanke said yesterday."
"`Policy approaches that would not be helpful, in my view, are those that would inhibit the dynamism and flexibility of our labor and capital markets or erect barriers to international trade,'' Bernanke said at an event sponsored by the Omaha Chamber of Commerce in Nebraska. Any hindrance of trade and technology would ``do far more harm than good.''"
"If we do not place some limits on the downside risks to individuals affected by economic change, the public at large might become less willing to accept the dynamism that is so essential to economic progress," Bernanke said in a speech to the Chamber of Commerce in Omaha Nebraska."
"Dick Grasso's critics have long said he was paid too much, particularly for heading what was at the time a nonprofit institution. And that the compensation process was flawed. But the Wall Street Journal reports today that he just didn't do a very good job, at least according to a report commissioned by New York Attorney General Eliot Spitzer.
A University of Utah finance professor concluded that during Grasso's highest-paid years new listings on the Exchange declined. So did its market share. Its overall trading volume soared, but so did that of every other stock exchange. The report says Grasso was just riding the wave, says Charles Jones who teaches finance at Columbia University."
While it is true that the market share and new listings were down, his performance is not as clear cut. For instance to say Grasso did a poor job is a little like saying that network television executives have done a poor job since the ratings have dropped in the age of cable and internet (which may or may not be true). What we don't know is whether the decline would have been worse under alternative management/strategies.
Gabaix and Landier ask “Why CEO pay has increased so much?”. Their answer: firms have gotten much larger.
Slightly longer version: Has CEO pay increased because of friendly boards?Super star status of CEOs?, or timing of option grants?Or is there an economically justified explanation.The answer is sure to surprise many who read only mainstream publications!In the authors’ own words (in the abstract):
“The marginal impact of a CEO's talent is assumed to increase with the value of the assets under his control….The model predicts the cross-sectional Cobb-Douglas relation between pay and firm size. It also predicts that the level of CEO compensation should increase one for one with the average market capitalization of large firms in the economy. Therefore, the five-fold increase of CEO pay between 1980 and 2000 can be fully attributed to the increase in market capitalization of large US companies.”
While the authors admit that the paper is "Preliminary and Incomplete" it is also interesting and informative so I will mention it prior to its finished version.
Cite:
Gabaix, Xavier and Landier, Augustin, "Why Has CEO Pay Increased So Much?" (March 14, 2006). MIT Department of Economics Working Paper No. 06-13 Available at SSRN: http://ssrn.com/abstract=890829
BTW I think I saw this earlier on FinancialRounds, but when I went back to find it, I could not, so ???
Wow. The NY Times has a great example of what can go wrong with Executive Compensation.
Some highlights:
* " As executive pay packages have rocketed in recent years, their defenders have contended that because most are tied to company performance, they are both earned and deserved. But as the Las Vegas Sands example shows, investors who plow through company filings often find that executive compensation exceeds the amounts allowed under the performance targets set by the directors."
*" Because of what the company called an "improper interpretation" of his employment contract, Sheldon G. Adelson, chairman, chief executive and treasurer of the Las Vegas Sands Corporation, received $3.6 million in salary and bonus last year, almost $1 million more than prescribed under the company's performance plan. "
*" Some employment agreements actually stipulate that they will provide bonuses even if company performance declines. The agreement struck in 2004 by Peter Chernin, president and chief operating officer of the News Corporation, entitles him to a bonus even if earnings per share fall at the company. If earnings rise by 15 percent in any given year, Mr. Chernin's bonus is $12.5 million. But if they fall 6.25 percent, Mr. Chernin's bonus is $4.5 million, and an earnings decline of 14 percent translates to a $3.52 million bonus. "
