The Wall Street Journal runs the numbers on the Top 25 Highest Paid CEOs of the Decade and they are, as you ought to expect, egregious.
Four of the top 10 and seven of the top 17 lost their shareholders money last decade.
The fat cat takehomes range from Larry Ellison’s $1.84 billion megahaul from Oracle to Aubrey McClendon’s mere $332 million at Chesapeake Energy. Ellison tripled his shareholders’ money, but it’s unclear why he needs options at all. The guy owns $28 billion of Oracle shares, enough to keep his interest aligned with shareholders as it is. McClendon’s shareholders fared very well, with their shares up nearly twelve times if they held them all decade long.
Those guys are less interesting than the guys who lost their shareholders’ money. Who are they?
No. 1 is Barry Diller of IAC and Expedia, whose shareholders lost 22 percent from 2000 to 2009.
No. 2 is Richard D. Fairbank of Capital One, whose shareholders lost 14 percent.
No. 3 is Angelo Mozilo of Countrywide. His shareholders lost 19 percent.
No. 4 is Henry R. Silverman of Cendant (which I used to cover), whose shareholders lost 49 percent.
No. 5 with a bullet is Dick Fuld of Lehman Brothers, whose shareholders lost everything (okay, 99 percent).
No. 6 is Michael Dell of the computers, who lost his shareholders 66 percent of their money.
No. 7 goes to John Chambers of Cisco, who lost his shareholders 29 percent.
And that’s not taking inflation into account. Take off another 21 percent for that. Some of these companies had dividends that counteract that effect, but I think the dividends are included in the Journal’s numbers, since it calls them “shareholder returns.” It should have made that explicit.
The WSJ acknowledges that Diller, for one, exercised in-the-money stock options he got in 1995 and that the stock has risen 300 percent since they were granted. Others had built-in gains that have to be taken into account, too.
But it’s also worth looking at IAC’s charts. It’s been worse than dead money for nearly fifteen years (and Expedia has been dead money since it was spun off in 2005). So if you had the misfortune of buying IAC a mere six months after Diller’s options were granted, you not only have lost 16 percent in real terms (the stock is up 21 percent not considering inflation) since mid-August 1995, but you got the pleasure of watching Diller dilute your holdings by cashing in for $463 million in 2005.
“I did exactly as well as shareholders during the exact same counting period,” Mr. Diller said in an interview. “If you’re thinking of alignment with shareholders, I can’t imagine a more aligned system.”
I imagine most other folks can. And that’s not even taking into account the outlandish idea of aligning executive compensation with that of their employees.
But the bigger takeaway is this: Executive prowess is way, way overrated. Business fortunes have much more to do with luck and external factors than they do with the doings of any one guy (and they’re all guys here). Pay should reflect that fact.