WHAT'S A CEO WORTH--AND WHEN?
In your recent article "CEO pay: Ready for takeoff" (Special Report, Apr. 24), you offer two yardsticks for measuring the compensation of top executives, one relating to how good a job the boss did for shareholders and the other to how well the boss did for the company.
Many in the finance industry would argue that the only meaningful way to judge company performance is based on the returns provided to shareholders and that it is in fact dangerous to judge the performance of companies based on traditional accounting measures such as return on equity. The reason this practice is dangerous is that accounting measures fail to consistently indicate the actual health and value of companies.
At the end of the day, I am investing in management's ability to generate an appropriate return on my investment, which can only be measured according to the shareholder returns (i.e., dividends and capital gains) that I receive. It is only appropriate, therefore, that the executives should be paid according to how well they perform for me and for the other owners of the company.
Wanchai, Hong Kong
How refreshing it was to read about Cabletron Systems Inc.'s President S. Robert Levine and Chairman Craig R. Benson, who take annual salaries of $52,000 a year. In light of the company's profits increasing 36%, to $810.7 million, these salaries are even more extraordinary. But here's the best part. Benson says: "Most of our compensation comes when we build the stock price up." What a unique concept. It boggles the mind to wonder what would happen if all major companies based their executive compensation on this simple proposition.
Gary W. Priester
Black Point, Calif.
Are you serious about the story of Cabletron executives bucking the high executive pay trend? They may only be paid $52,000, but how many people own $927 million worth of stock? Their disgust with out-of-control executive pay is at the very least hypocritical. The two are seen as valiant do-gooders for taking so little pay, yet Mr. Levine has the ability to write a $70,000 personal check. On closer examination, their low pay has less to do with some noble cause and is more likely linked to their huge bank balances accumulated from the sale of $500 million worth of stock.