Friday, June 02, 2006

Comic Compensation

Executive compensation continues to dominate the headlines. The New York Times ran a very good article on June 1, 2006, entitled “Big Bonuses Still Flow, Even if Bosses Miss Goals.” The book, Pay Without Performance, which I reviewed in a previous post (May 23, 2006), was mentioned along with an expose on improper compensation at the Las Vegas Sands Corporation.

The reporter was rather indignant about a calculation error at Las Vegas Sands that led to a million-plus in excess bonus compensation being paid to senior executives. Even after the error was discovered, the Las Vegas Sands board of directors was in such good humor over management’s performance that they did not ask for the money back.

Maybe those Harvard professors who wrote Pay Without Performance have it wrong. Perhaps senior executives get the big pay, not because they have so much control over the board of directors, but because they are just very good entertainers. Indeed, after several years as an analyst, I have heard enough pearls of wit and wisdom from management to have my own Academy Awards for Executives.

Best Off-color Remark During a Roadshow Presentation

“We don’t just follow a Poke and Hope strategy.” -- CEO of a nanotechnology company regarding an R&D program

Best Presentation Introduction

“…and just in case I say something during my presentation that could be construed as even little positive, please remember this disclaimer about Forward Looking Statements.” -- CEO of a security system provider at a homeland defense conference

Most Revealing Conference Call Comment

“Their due diligence was very thorough. I think they even know what kind of undershorts I wear. It was an entirely pleasant experience.” -- President of an Acquired Operation during a conference call to discuss the transaction

Most Arrogant Conference Call Comment

“It is an accounting charge. It has no cash-flow impact. It doesn’t say anything about whether we overpaid or underpaid for assets.” -- CFO of a leading UK-telecom service provider on the largest acquisition-related goodwill write-off
in UK history just three years after completing the world’s largest takeover deal


I note that the first three quotes are from senior officers of small cap companies, none of whom could be charged with receiving excessive pay. The fourth is among those who could be considered as amply compensated for his troubles by his very substantial employer.

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