News of store closings, Chapter 11 filings, and job cuts receded into the shadows this week as the glaring media spotlight that was focused on AIG executive bonuses also shined onto the earnings of top retail industry CEOs. Retail executives found themselves in the headlines, being compared to the AIG leaders who were awarded substantial bonuses paid with government bailout money.
Consumers rode a roller coaster of emotions from rage to revenge as the AIG employees got their personal bailouts, and then lost them again within the same work week when lawmakers voted to levy equally substantial taxes on the ill-gotten gains.
It’s not that anyone begrudges great rewards for great performance. The collective assumption until this week, however, has been that those who prosper when times are good will also take it in the wallet when times are bad. Apparently, though, the top executive compensation packages are not structured with such a logical or equitable formula.
When fourth quarter earnings reports show multi-million dollar losses, the proxy filings that follow which report multi-million dollar bonuses for executives just can't be reconciled. Today’s CEO compensation packages seem to be calculated like a game of “heads I get a big bonus,” and “tails I get a big bonus anyway.”
For instance, according to their 2009 proxy statement, eBay rewarded John Donahoe with compensation valued at $22.5 million for his nine months of work as CEO in 2008. Under Donahoe's leadership, eBay’s revenue declined in every quarter, marketplace sales declined for three consecutive quarters for the first time in the company’s history, there was a net loss of 7% in the fourth quarter holiday shopping season, and stock prices fell 62%.
More about Donahoe's 2008 compensation