Capitalist Pig Roast

While on the treadmill at my athletic club recently, I was watching two high-mounted television monitors. The television on the right was showing a CNN report about the awful December 26th earthquake and tsunami. From Thailand to Indonesia to Sri Lanka, it was one devastating scene after another--distraught parents searching for their children, children wandering alone, dazed and crying, the injured lying in makeshift hospital beds, the dead lying in makeshift morgues. Wide eyes searching plaintively, begging for a morsel of food, a comforting shoulder.

On the next monitor, the "Style" channel was showing the Annual Napa Valley Wine Auction. Let your eyes linger once more on that term W I N E A U C T I O N. Oh, but that was not all, since positively all parties for the rich and self-important have to have a theme, this party was done in the manner of a 1920s speakeasy. Fake guards guarding fake doors. Fake passwords to get in and mingle with, I'll guess, a bunch of fake personalities. How lovely not to be in Sri Lanka. These bourgeois pretenders to the throne, with their diamonds furs and costly cars, would look like vapid idiots on even the best day B I D D I N G on W I N E. On that day, though, they looked even worse. Awful what happened over there with that Tsumani, isn't it dear. Oh my, yes! Just awful. Have you seen the hors d'oeuvres?
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The Dow Jones Newswire reports that Merrill Lynch & Co., Morgan Stanley, Goldman Sachs Group Inc. and Lehman Brothers Holdings gave their CEOs an average raise of 33%, while those firms' stocks rose an average of 4.7%. Total compensation, including salary and a variety of cash and stock-related bonuses, totaled $32 million for Merrill's Stan O'Neal, $22 million for Morgan Stanley's Phil Purcell, $29.8 million for Henry Paulson Jr. of Goldman, and $26.3 million for Richard Fuld of Lehman.

With regard to Morgan Stanley, its shares fell 8.2% in its fiscal year ended Nov. 30, while its CEO got a 47% raise from the previous year's pay, which Morgan puts at $15 million, after adjusting for options that were offered in 2003 but not 2004.

I find that particularly interesting (read: "galling"). I know a Sales Assistant who has worked at Morgan Stanley for more than 20 years. In case you aren't aware, Sales Assistants are the people who actually keep brokerage firms in business while their brokers are out playing golf or otherwise ignoring their customers. It should suffice to say that, without Sales Assistants like the one I know, Phil Purcell might be looking for another job (bank robber maybe?). Oh, guess what my friend, the Sales Assistant makes after 20 years on the job: $30,000.
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Wall Street Journal Says CEO Bonuses Rise 46.4% In 2004

CEO bonuses surged last year. At 100 major U.S. corporations, CEO bonuses rose 46.4% to a median of $1.14 million. Among big winners were Michael Eisner at Walt Disney Co., where 45% of the shares voted at its 2004 annual meeting opposed his re-election to its board; and John Tyson at Tyson Foods Inc., the target of a recent Securities and Exchange Commission probe into whether the company improperly accounted for perquisites provided to Don Tyson, his father and predecessor.

At Disney, Mr. Eisner pocketed a $7.25 million cash bonus for the year that ended Sept. 30, up from nothing the year before. Disney directors rewarded him for its robust earnings recovery despite the shareholder revolt that cost him his chairmanship last March.

At Shaw Group Inc., a Baton Rouge, La., construction-and-engineering business, Chief Executive J.M. Bernhard Jr. received a $238,000 bonus for a year in which the company lost $31 million. He has led Shaw since he helped found it in 1987 and remains its biggest individual shareholder.
"In the judgment of the compensation committee of the board of directors, he earned [the bonus]," says Chris Sammons, a Shaw vice president. During the second half of fiscal 2004, which ended Aug. 31, Mr. Sammons adds, "the company returned to profitability and generated significant cash flow."

Mr. Bernhard was one of five chiefs whose bonuses went up while their employers' net income went down last year.

On the other hand, several CEOs experienced steep upturns in both bonus and profitability. Brian L. Halla, head of National Semiconductor Corp. in Santa Clara, Calif., received a $5 million bonus for the year ended May 30, representing a 12-fold increase over the prior year's $400,500. Reaping his biggest bonus since he took command in 1996 "was wonderful," Mr. Halla remembers. "I feel I should pay somebody for doing this job."

The semiconductor maker swung to a $283 million net profit in fiscal 2004 from a $33.3 million net loss in fiscal 2003. The board also paid Mr. Halla a handsome bonus because the company exceeded maximum performance levels set for revenue growth and return on invested capital.
Mr. Halla may soon collect an even fatter bonus check. He can make up to $6 million a year under a new pay plan intended to sweeten senior officers' potential cash incentives and reduce their reliance on options. He got one million options (adjusted for a subsequent stock split) in fiscal 2004, 22% fewer than in 2003.

The $6.6 million bonus Joseph W. Luter III at Smithfield Foods Inc. garnered for the year ended May 2 was a nearly ninefold increase from $698,429 the year before. He has run the Smithfield, Va., meat processor since April 1975 and made an $850,000 salary for almost five years.
Smithfield directors say they decided to award Mr. Luter a bonus only if 2004 pretax profit exceeded $100 million. They gave him 2% of such earnings between $100 million and $300 million plus 3% of the portion over $300 million. The company posted record net income of $227.1 million last year.

"We were trying to make sure [Mr. Luter's] rewards are based on the ups and downs of the company," says Ray A. Goldberg, an emeritus Harvard professor of agriculture and business who chairs the board's pay panel. "Compared to others in the industry, he's underpaid -- including bonuses."

Mr. Tyson, leader of the nation's biggest U.S. meatpacker, received a $5.4 million bonus for the year ended Oct. 2. It was his largest since he assumed the helm in April 2000 and more than twice as big as his 2003 bonus.

Under the senior-executive bonus plan, the Tyson Foods chairman and CEO should have collected only about $4.6 million. Directors of the Springdale, Ark., company justified the extra cash by using criteria from a new bonus plan being submitted for shareholder approval, according to the proxy.

Mr. Tyson's employment contract guarantees him a $1 million salary, 500,000 stock options a year, an annual grant of performance shares valued at $2.47 million, and personal use of corporate aircraft. Among his other perks last year was a $2,000 department-store gift card for the holidays.

"We experienced a record year in 2004, and as a result, overall compensation including performance-based bonuses, reflected the company's results," says Gary Mickelson, a Tyson spokesman. "We believe our compensation program, which is largely performance-based and approved by three independent board members, is consistent with other programs at similarly sized companies."

Tyson Foods and Don Tyson, its retired chief, have offered to pay a combined $1.7 million to settle the SEC probe without admitting any wrongdoing. The full commission has yet to approve the deal. Agency staffers previously planned to recommend a civil action against the concern for allegedly failing to accurately disclose about $1.7 million of benefits given to the elder Mr. Tyson in the fiscal years 1997 through 2003.

Some chief executives received a bonus last year not long before they lost their corner office. Carly Fiorina, Hewlett-Packard Co.'s chairman and chief executive, won a bonus of about $1 million for the first six months of the year that ended Oct. 31. She failed to land a second-half bonus because the giant printer and computer maker missed performance targets such as higher net profit and revenue.

The Palo Alto, Calif., company nevertheless paid her a $567,000 discretionary bonus in mid-December -- part of $90 million distributed to all employees following its fourth-quarter earnings recovery. Directors sought "to recognize the hard work that was put in after a very difficult third quarter," recalls Bob Sherbin, an H-P spokesman.

The board dismissed Ms. Fiorina earlier this month. "You have to wonder how directors justify paying big bonuses and a few months later firing a CEO," says Carol Bowie, director of governance-research services at the Investor Responsibility Research Center in Washington.