Wednesday, March 16, 2005

 

Shaw's CEO Highlighted in Wall Street Journal Article Because of Obscene Bonus When Company Lost Money

CEO bonuses at top 100 companies rise 46.4 percent
By JOANN S. LUBLIN
The Wall Street Journal
02/27/2005

Bonuses for many chief executives surged last year amid rising criticism of what some deem excessive compensation, especially in cases where the bottom line doesn't keep pace.

At 100 major U.S. corporations, CEO bonuses rose 46.4 percent to a median of $1.14 million, the largest percentage gain and highest level in at least five years, according to an exclusive survey by Mercer Human Resource Consulting in New York. Mercer, which began tracking the latest proxy statements of 100 big companies for The Wall Street Journal in 1999, didn't scrutinize any heads of Wall Street firms, where much higher bonuses are common.


The Mercer study also revealed that the median 2004 bonus equaled 141 percent of annual salary, another record. Clerical and technical-support staff earned an average bonus of 5 percent of salary last year at concerns granting bonuses across the board, other surveys indicate.

CEOs in the Mercer study enjoyed median total direct compensation of $4,419,300 - about 160 times as much as the average U.S. production worker made last year. (Total direct compensation includes salary, bonus, the value of restricted stock at the time of grant, gains from stock-option exercises and other long-term incentive payouts.)

"This is not a good trend because the bonus traditionally has not been well-linked to performance," said Lucian Bebchuk, a Harvard law professor and co-author of the recent book, "Pay Without Performance." Corporate boards' compensation committees have wide discretion to set and change management bonus programs.

Boards defend the surge in CEO bonuses as a sign of improved profits and the diminished popularity of stock options. But activist investors and governance watchdogs contend that the enlarged awards often are unjustified.


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.

Bernhard was one of five chiefs whose bonuses went up while their employers' net income went down last year, the Mercer analysis showed.
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