“Pay for failure really seems to alienate investors.”
The “pay for failure” quote comes from Intel’s director of executive compensation Brit Wittman.
Intel has just awarded its CEO a $9 million a year salary compared to the $15.7 million he earned previously as Intel’s COO.
$9 million is right on the button of the average CEO pay awarded among S&P 500 companies which have filed executive compensation figures this year, according to the management consultancy Institutional Shareholder Services (ISS),
The $9 million is less than half the salary of the previous Intel CEO.
If the new CEO wants to earn more, he has to make it on his options and that means increasing the share price which means increasing the value of the company.
A tough call because Intel’s share price hasn’t risen for a decade, even though the S&P 500 rose 32% last year.
Of course, a static share price isn’t as bad as a declining one.
Where managements have engineered a declining share price, declining revenues, increasing losses, missed targets and a never-ending schedule of job-cuts, it is clearly inappropriate for managements to maintain, let alone increase, their compensation.
Some managements build companies and no one minds that they get well rewarded, but some managements ruin companies and it is an unedifying spectacle to see them rewarding themselves for doing it.
So good old Intel for grasping this nettle.
The industry needs builders, not looters.