[REBORN FROM THE ASHES][comment][12.23]&[12.24] - 寄托家园留学论坛

Executive pay

This house believes that on the whole, senior executives are worth what they are paid

About this debate

Over the past few decades executive pay has risen dramatically. Bosses who were once paid ten times as much as shopfloor workers are now sometimes paid as much as 300 times as much. This trend was never popular, even during good times. But today it is becoming radioactive, as governments step in to rescue failing companies and ordinary people are forced to tighten their belts.

Is the anger justified? Some argue that executive pay is a long-standing disgrace. Pay is often not tethered to performance. Huge rewards for the few demotivate the rest of the workforce. Others are more sanguine. Successful executives, such as Jack Welch, former CEO of General Electric, can add hugely to a firm's profitability, benefiting workers, managers and shareholders alike. The growing pay of executives has to be balanced against the growing difficulty of their jobs, particularly as turnover in the boardroom increases.

Opening statements

Defending the motion

Steven N. Kaplan Neubauer Family Prof. of Entrepreneurship & Finance, University of Chicago Booth School of Business

In the United States, the United Kingdom and elsewhere, CEOs are routinely criticised for being overpaid.

Against the motion

Nell  Minow Editor and Co-founder, The Corporate Library

Excessive executive compensation of the past decade is both a symptom and a cause of the current economic mess.

The moderator's opening remarks

Oct 20th 2009 |   Adrian  Wooldridge

Oneof the few things that anti-globalisation campaigners and stockmarketinvestors agree upon is that executive pay is out of control.
Itis not hard to understand this shared outrage: executive pay hasexploded since the 1980s. For most of the postwar era executives earneda few multiples of the median pay. But thereafter, starting in Americaand slowly spreading to the rest of the world, the multiples increasedexponentially. Today many American workers earn in a year what theirboss takes home in an evening.
Isn't this a disgrace? Critics ofexecutive pay worry that even mediocre bosses are given outsizedrewards. Robert Nardelli received a $20m pay-off when he left HomeDepot even though the share price had fallen during his six-yeartenure. Carly Fiorina was $180m better off when she leftHewlett-Packard despite a lacklustre tenure. Defenders of executive payargue that great bosses such as Louis Gerstner, the former boss of IBM,and Jack Welch, the former boss of General Electric, are worth everypenny because they create huge amounts of wealth for both shareholdersand employees.
The debate about executive pay, though never cool,is particularly hot at the moment. Workers have been squeezed by therecession. Unemployment is approaching 10% in the United States andmuch higher numbers in many other countries. Numerous governments areplanning to deal with their rising deficits by freezing public-sectorpay. And yet many bosses and bankers continue to make out likebandits—or so lots of people think.
We are lucky to have two ofthe best people in the business to debate this subject. Steven Kaplan,who proposes the motion, teaches at the University of Chicago's BoothSchool of Business. Nell Minow, who opposes it, is a long-timeshareholder activist and chairwoman of the Corporate Library, aresearch company. (For people who want to know more about her she isalso the subject of a profile in a recent issue of the New Yorker.)
MrKaplan starts off by making two fundamental points. CEO pay has notgone up in recent years; indeed, it has been dropping since 2000,particularly in relation to other well-paid groups, such as hedge fundmanagers, lawyers, consultants and professional athletes. Nor is CEOpay unrelated to performance. Boards are increasingly willing to fireCEOs for poor performance.
Ms Minow focuses heavily on therelationship between pay and the recent credit crunch. She points outthat executive pay helped to create the mess in the first place:Countrywide's CEO, Angelo Mozillo, made more than $550m during his timein office. She also points out that the fact that many companies thatwere bailed out by the government continue to pay their CEOs hugesalaries and bonuses is damaging the credibility of the system.
Suchbold opening statements raise questions galore. Is Mr Kaplan justifiedin starting his account in 2000 rather than 1980, when executive payexploded. And is Ms Minow right to concentrate so heavily on thefinancial sector? These are only a couple of the questions that we needto thrash out in the coming days.

The proposer's opening remarks
Oct 20th 2009 |   Steven N. Kaplan

In the United States, the United Kingdom and elsewhere, CEOs are routinelycriticised for being overpaid. Critics argue that boards do not respondto market forces, but, instead, are dominated by or are over-generousto their CEOs. Boards are criticised for not tying CEOs' pay toperformance. These criticisms have been exacerbated by the financialcrisis and the desire to find scapegoats.
I argue below that thecritics are wrong and that there are many misperceptions of CEO pay.While CEO pay practices are not perfect, they are driven by marketforces and performance. Contrary to public perception, CEO pay has notgone up in recent years. In fact, the average CEO pay (adjusted forinflation) has dropped since 2000, while the pay of other groups hasincreased substantially. Similarly, the view that CEOs are not paid forperformance is wrong. In fact, the opposite is true and boardsincreasingly fire them for poor performance. And, most recently,consistent with market forces driving pay, the US and UK governmentseach hired a new CEO (of AIG and the Royal Bank of Scotland) for payexceeding that of the median large company CEO.
It is useful tounderstand how CEO pay is measured. It includes three components:salary, bonus and stock-based pay. It is usually measured in two ways.The first is the sum of salary, bonus, restricted stock and theexpected value of stock options. I call this expected pay. Expected paymeasures what boards believe they awarded the CEO. This is the bestmeasure of what a CEO is paid each year. Note that the CEO does notactually walk away with this money. The second measure replacesexpected stock option values with values actually realized and realisedpay measures what CEOs walk away with.
The first graph shows average and median expected CEO pay forS&P 500 CEOs since 1994 (adjusted for inflation). It shows thatmedian CEO pay has been stable since 2001; it has not increased. Andaverage pay has declined substantially. In fact, average CEO pay in2008 is below the average in 1998.

Whileaverage CEO pay has declined, the pay of other highly paid groups hasincreased. The second graph shows S&P 500 CEO pay relative to theincome of the top 1% of US taxpayers. Relative to those other groups,CEOs are no better off in 2008 than in 1994. Strikingly, relative CEOpay is a half of what it was in 2001, a huge decline.

Whichare those groups that have earned increasingly high compensation? Hedgefund, private equity and venture capital investors have increased theirassets and fees substantially, translating into high pay. By oneestimate, the top three hedge fund managers earned more in 2007 thanall 500 S&P 500 CEOs combined. Professional athletes, investmentbankers, consultants and lawyers also have benefited greatly. Forexample, from 2004 to 2008, the inflation-adjusted pay of partners atthe top 20 law firms increased by 12% while that of S&P 500 CEOsdropped 12%. Those law firms had over 3,000 partners making an averageof $2.4m each.
One can look at the Obama administration for otherexamples. Larry Summers made $8m (more than the median S&P 500 CEO)giving speeches and working part-time for a hedge fund. Eric Holdermade $3.5m as a law partner.
So, while CEOs earn a lot, they arenot unique. The pay of people in the other groups has undoubtedly beendriven by market forces; all are compensated in arm's-length markets,not by cronies. Technology, globalisation and scale appear to haveincreased the market value of these groups. CEOs have not done betterand, by some measures, have done worse. Those who argue CEOs areoverpaid have to explain how CEOs can be overpaid and not subject tomarket forces, when the other groups are paid at least as well and aresubject to market forces.
Why is the pay of these other groupsrelevant for CEOs? Top executives regularly leave to work for privateequity firms and hedge funds. Law partners and consultants leave towork for public companies as general counsels and executives. Relativepay matters and all these groups are paid according to market demand.Markets are the driving force for senior executives in all theseindustries and talented people jump across industries, based on marketperceptions of their worth.
Critics also argue that CEO pay isnot tied to stock performance. Again, that is not true. Looking at whatCEOs actually receive—realised pay—Josh Rauh and I found that firmswith CEOs in the top decile of realised pay earned stock returns 90%above those of other firms in their industries over the previous fiveyears. Firms with CEOs in the bottom decile of realised payunderperformed by almost 40%. The typical CEO is paid for performance.
Thiswas reinforced in 2008, when average realised CEO pay declined by 25%(according to S&P's Execucomp). And Equilar, another provider ofCEO pay data, estimated that the typical CEO experienced a net worthdecline of over 40%.
The final myth to bust is that CEOs controltheir boards and earn high pay through this control and notperformance. In fact, CEO tenure has declined, from ten years in the1970s to six years today, and boards have got tougher on theirexecutives when they do not perform.
In sum, market forces governCEO compensation. CEOs are paid what they are worth. Talentedindividuals, who are perceived to be valuable, can move betweenindustries to be compensated well. The clearest example of this is thateven governments have to pay highly for talented executives. Recently,the Royal Bank of Scotland (under UK government control) hired a CEOwith a package worth up to $16m; AIG (under US government control)hired a CEO with a package worth up to $10.5m. For these critical jobs,both of these executives received compensation exceeding the pay of themedian S&P 500 CEO.

The opposition's opening remarks
Oct 20th 2009 | Nell  Minow

Excessiveexecutive compensation of the past decade is both a symptom and a causeof the current economic mess. And the post-meltdown awards are all butguaranteed to continue to create perverse incentives that will rewardmanagement and further damage the interests of shareholders and everyother participant in the economy.
Incentive compensation rewardedexecutives for the quantity of transactions rather than the quality oftransactions. It inevitably led to failures like the subprime disasterand the dominoes it toppled as it took the economy down with it. Worstof all, the avalanche of post-bailout bonuses and departure packageslike the $53m Ken Lewis got from Bank of America have severely damagedthe credibility of Wall Street and the American financial markets as awhole. The billions of dollars of losses do not come close to thereputational hit to American capitalism, which will increase the costof capital for all US companies.
Panglossian observers willalways be able to find some metric to justify any level of pay. But theresults speak for themselves. The decisions that led to the meltdownwere made by executives who knew that they would be paid tens, evenhundreds of millions of dollars no matter how successful theconsequences of those decisions.
Let us look at ground zero ofthe subprime mess, Countrywide, where Angelo Mozilo made more than$550m during his time as CEO. When the compensation committee tried toobject to his pay levels, he hired another compensation consultant,paid for by the shareholders, to push them into giving him more. Healso pushed for, and was given, shareholder subsidies, not just for hiswife's travel on the corporate jet but for the taxes on the imputedincome from that travel. Instead of telling Mr Mozilo that he had nobusiness asking the shareholders to subsidise his taxes, the boardmeekly signed off on it, making it clear to everyone in the executivesuite that the pay-performance link was not a priority.
By theend of 2007, when Countrywide finally revealed the losses it hadpreviously obscured, shareholders lost more than 78% of theirinvestment value. Meanwhile, in early 2007 Mr Mozilo sold over $127m inexercised stock options before July 24th 2007, when he announced a$388m write-down on profits. Before the bailout, Countrywide narrowlyavoided bankruptcy by taking out an emergency loan of $11 billion froma group of banks. Mr Mozilo continued to sell off shares, and by theend of 2007 he had sold an additional $30m in exercised stock options.There is the definition of outrageously excessive compensation.
Countrywideresponded to a shareholder proposal that year asking for a non-bindingadvisory vote on its pay plan by urging shareholders to oppose itbecause "Countrywide has been an outstanding performer" and because"The Board's Compensation Committee has access to the best informationon compensation practices and has a thorough process in place todetermine appropriate executive pay." They could hardly have doneworse. And it is likely that some market feedback on the structure ofthe pay plan could have given compensation committee members Harley W.Snyder (chair), Robert J. Donato, Michael E. Dougherty and Oscar P.Robertson worthwhile guidance.
Michelle Leder of theindispensable Footnoted.org website discovered that Frank A. Keating,Charles T. Maxwell and Frederick B. Whittemore, the compensationcommittee at Chesapeake Energy, not only paid the CEO, AubreyMcClendon, $100m, a 500% increase as the stock dropped 60% and theprofits went down 50%, they spent $4.6m of the shareholders' money tosponsor a basketball team of which Mr McClendon owns a 19% stake, theypurchased catering services from a restaurant which he owns just undera half of, and they took his collection of antique maps off his handsfor $12.1m of the shareholders' money, based on a valuation from theconsultant who advised Mr McClendon on assembling the collection. Theboard justified this by referring to Mr McClendon's having to sell morethan $1 billion worth of stock due to margin calls, his havingconcluded four important deals and the benefit to employee morale fromhaving the maps on display in the office. A market-based response wouldbe: (1) that was his risk and it is inappropriate to the point ofmisappropriation to force the other shareholders, already substantiallyout of pocket with their own losses due to his poor leadership of theorganisation, make up for his losses (2) if the deals are good ones, hewill be adequately rewarded when the benefit of those deals isreflected in the stock price; and (3) you have got to be kidding. Ifthis is pay for performance, what exactly is the performance we arepaying for?
These may be anecdotes, but they are illuminatingones. The numbers and details may be at the extreme, but the underlyingapproaches are representative. Even as outliers, they still demonstratethe failure of the system to ensure a vigorous, arm's-length system fordetermining pay and the inability of the system to require an effectiveincentive programme with a genuine downside as well as an upside.
Inmy comments, I will discuss the seven deadliest sins of executivecompensation, the two key elements that are essential for any plan thatmerits support from investors and the only metric that matters inlooking at pay.

http://www.economist.com/debate/days/view/402

③The example of Angelo Mozilo , making it clear to everyone in the executive suite that the pay-performance link was not a priority.

在事例的最后提出了反方的观点，与事实进行比较，使反驳更加有力：A market-based response would be: (1) that was his risk and it is inappropriate to the point of misappropriation to force the other shareholders, already substantially out of pocket with their own losses due to his poor leadership of the organisation, make up for his losses (2) if the deals are good ones, he will be adequately rewarded when the benefit of those deals is reflected in the stock price; and (3) If this is pay for performance, what exactly is the performance we are paying for?

This debate is very wonderful.The proposed side remark on specialficially that senior executives pays are worth what they are paid.There are two resons,one is that CEOs pays has decreased while the salary of other well-paid groups is increasing,considering the three components:salary,bonous and stock-based pay,and the other reason is that they earn high pay through their control and contribution rather than performance.Contrary to public perception,Mr Kaplan critic the argue public doubted one by one.After reading this part,I am firmly convinced that the CEOs are paid what they are worth,relavating to the performance,capability and responsibility.Ms Minow directly figure out unkown measures on forcing market with two representative example,and she argues that because of the phenominon exists,CEOs are overpaid.The two suitable cases Ms Minow refute the defending side is not strong,for they are considered typical in several efficient field not all of them.Compared with Mr Kaplan, Ms Minow did not prove his position further more.

In my appinion,I think the position of senior executives deserve more responsibility and working pressure,the ability they need to afford the position decides they earn high pay what they worth.

[Topic: Executive pay]
Issue: This house believes that on the whole, senior executive are worth what they are pay.

The proposer's opening remarks Steven N. Kaplan
【Thesis】 Critics have been in psychologically imbalance.
1【Reason】 CEO pay is driven by market forces and performance.
1.1『Evidence1.1』CEO pay has not gone up but dropped, comparing with other well-paid groups
[Measurement]How CEO pay is measured: Three components measured in two ways.

[Description]The wave of (average and median) expected pay (with data)
[Comparison] Other well-paid groups (Data)
[Description] About the well-paid groups (Classification and Examples)
[Sub Argument]CEOs are not unique. Their pay has been pay driven by market forces as people in the other groups. [Defense] Critics must explain how CEO can be overpaid and not subject to market forces while other groups are consistent to market.
1.2『Evidence1.2』:The pay of other groups is relevant for CEOs, because relative pay matters (the occupation they choose) and payment are according to market demand.
2【Reason】 CEO pay is tied to stock performance.
『Evidence2』 Examples and Data
3【Reason】 CEOs do not control their boards.
『Evidence3』 CEO tenure has declined and CEO has been treated tougher by boards.
【Conclusion】Market forces govern CEO compensation.[Examples]Governments payment

【Thesis】Excessive executive compensation is both a symptom and a cause of the current economic mess.
【Reason】Incentive compensation rewarded executives for the quantity of transactions rather than the quality of transactions which led to subprime disaster.

Reference
The pay of people in the other groups has undoubtedly been driven by market forces; all are compensated in arm's-length markets, not by cronies.
Arm's-length markets

Arm's length principle
The arm's length principle (ALP) is the condition or the fact that the parties to a transaction are independent and on an equal footing. Such a transaction is known as an "arm's-length transaction".
http://en.wikipedia.org/wiki/Arm's_length_principle
----------------------------------------------------------------------------------------------------------------
Sentences and Phrases
This trend was never popular, even during good times. But today it is becoming radioactive, as governments step in to rescue failing companies and ordinary people are forced to tighten their belts.
Popular=radioactive
Tighten ones’belts=Retrenchment

These are only a couple of the questions that we need to thrash out in the coming days.
Thrash out=discuss and solve (A Plan, Problem or Agreement)

The multiples increased exponentially.

These criticisms have been exacerbated by the financial crisis and the desire to find scapegoats.

And the post-meltdown awards are all but guaranteed to continue to create perverse incentives.

Functional Senteces
【Introduction to topic】
The debate about executive pay, though never cool, is particularly hot at the moment.

These may be anecdotes, but they are illuminating ones. The numbers and details may be at the extreme, but the underlying approaches are representative.

----------------------------------------------------------------------------------------------------------------
My Comments

Part One: Comment on the Proposer
Only after reading Debates from Economists do I truly realized what sentences mean as follows:

Part Two: Comment on the Opposition
When I read the first and second paragraph, hardly can I believe such a stupid mistakes come from a long-time shareholder activist and chairwoman.

Nell Minow wrote:“The decisions that led to the meltdown were made by executives who knew that they would be paid tens, even hundreds of millions of dollars no matter how successful the consequences of those decisions.”

In fact, it is well known that the most important component of CEOs’ payment is stock-base pay. CEOs really care the consequence of their decisions which directly affect their stock returns. So it is really ridiculous to treat CEOs as workers who work very passively due to fixed salaries.

However, when I come to the next paragraphs, I know what the author means. I am sorry that I misunderstand the purpose of Ms. Minow. It is impossible for her to ignore the relationship between rewards and stock price. The example of Aubrey McClendon is valid, and I think I am one of those people who she was talking to “…you have got to be kidding. If this is pay for performance, what exactly is the performance we are paying for?”

Then Mr. Minow again surprises me. She wrote:” These may be anecdotes, but they are illuminating ones. The numbers and details may be at the extreme, but the underlying approaches are representative.”Well, I cannot but admit these two cases really serve as illuminating ones. I cannot but agree other executives may more or less use similar approaches for their own profits. She is right.

But, we cannot simply treat other executives as Angelo Mozilo and Aubrey McClendon. They are extreme examples, as what Nell said. Such great power to control boards, like raise in payment or misappropriation by enforce the other shareholders, is very very rare.

All in all, Steven N. Kaplan is a good scholar. He supported his issue in a boarder view and discuss questions as a whole, while Nell Minow only used two examples, though they are strong, to criticize executive pay.

Although Mr. Kaplan didn’t completely persuade me because he didn’t suggest a way to compare value created by executives with their payment, he really does an excellent work to show CEOs have not been in a better situation than before. Nell Minow’s examples are illuminating and persuasive, but their range for explanation is too limited.

I believe most of people would like to accept what Ms Minow said, but I personally prefer Mr. Kaplan because of his explanatory power. That is the difference between scholar and business woman.

But today it is becoming radioactive, as governments step in to rescue failing companies and ordinary people are forced to tighten their belts.

Is the anger justified? Some argue that executive pay is a long-standing（长期存在的） disgrace. Pay is often not tethered to performance. Huge rewards for the few demotivate the rest of the workforce. Others are more sanguine. Successful executives, such as Jack Welch, former CEO of General Electric, can add hugely to a firm's profitability, benefiting workers, managers and shareholders alike. The growing pay of executives has to be balanced against the growing difficulty of their jobs, particularly as turnover in the boardroom increases.

bandits（强盗）

crunch. bailed out

thrash out（研究解决）

focuses heavily on
walk away with（顺手拿走；偷走；拐逃）
Strikingly

off his hands（不再有某人负责）
deadliest sins（不可饶恕的罪行）

margin calls（补充保证金通知，增收保证金，征收保证金的要求）

But thereafter, starting in America and slowly spreading to the rest of the world, the multiples increased exponentially. Today many American workers earn in a year what their boss takes home in an evening.

Isn't this a disgrace? Critics of executive pay worry that even mediocre（普普通通的） bosses are given outsized rewards. Robert Nardelli received a $20m pay-off when he left Home Depot even though the share price had fallen during his six-year tenure. Carly Fiorina was $180m better off when she left Hewlett-Packard despite a lacklustre tenure. Defenders of executive pay argue that great bosses such as Louis Gerstner, the former boss of IBM, and Jack Welch, the former boss of General Electric, are worth every penny because they create huge amounts of wealth for both shareholders and employees.

Critics argue that boards do not respond to market forces, but, instead, are dominated by or are over-generous to their CEOs. Boards are criticised for not tying CEOs' pay to performance. These criticisms have been exacerbated by the financial crisis and the desire to find scapegoats（替罪羊）.

A board's activities are determined by the powers, duties, and responsibilities delegated to it or conferred on it by an authority outside itself. These matters are typically detailed in the organization's bylaws. The bylaws commonly also specify the number of members of the board, how they are to be chosen, and when they are to meet.

In an organization with voting members, e.g., a professional society, the board acts on behalf of, and is subordinate to, the organization's full assembly, which usually chooses the members of the board. In a stock corporation, the board is elected by the stockholders and is the highest authority in the management of the corporation. In a nonstock corporation with no general voting membership, e.g., a university, the board is the supreme governing body of the institution.

The legal responsibilities of boards and board members vary with the nature of the organization, and with the jurisdiction within which it operates. For public corporations, these responsibilities are typically much more rigorous and complex than for those of other types.

I argue below that the critics are wrong and that there are many misperceptions of CEO pay. While CEO pay practices are not perfect, they are driven by market forces and performance. Contrary to public perception, CEO pay has not gone up in recent years. In fact, the average CEO pay (adjusted for inflation) has dropped since 2000, while the pay of other groups has increased substantially. Similarly, the view that CEOs are not paid for performance is wrong. In fact, the opposite is true and boards increasingly fire them for poor performance. And, most recently, consistent with market forces driving pay, the US and UK governments each hired a new CEO (of AIG and the Royal Bank of Scotland) for pay exceeding that of the median large company CEO.

The pay of people in the other groups has undoubtedly been driven by market forces; all are compensated in arm's-length markets, not by cronies. Technology, globalisation and scale appear to have increased the market value of these groups. CEOs have not done better and, by some measures, have done worse. Those who argue CEOs are overpaid have to explain how CEOs can be overpaid and not subject to market forces, when the other groups are paid at least as well and are subject to market forces.

The final myth to bust is that CEOs control their boards and earn high pay through this control and not performance. In fact, CEO tenure has declined, from ten years in the 1970s to six years today, and boards have got tougher on their executives when they do not perform.

Incentive compensation（奖金） rewarded executives for the quantity of transactions rather than the quality of transactions. It inevitably led to failures like the subprime disaster and the dominoes it toppled as it took the economy down with it. Worst of all, the avalanche of post-bailout bonuses and departure packages like the $53m Ken Lewis got from Bank of America have severely damaged the credibility of Wall Street and the American financial markets as a whole. The billions of dollars of losses do not come close to the reputational hit to American capitalism, which will increase the cost of capital for all US companies.

Panglossian observers will always be able to find some metric to justify any level of pay.
（？）But the results speak for themselves. The decisions that led to the meltdown were made by executives who knew that they would be paid tens, even hundreds of millions of dollars no matter how successful the consequences of those decisions.

Let us look at ground zero（“爆心投影点”组织，成立于华盛顿，宣传核爆炸的毁灭性） of the subprime mess, Countrywide, where Angelo Mozilo made more than $550m during his time as CEO. When the compensation committee tried to object to his pay levels, he hired another compensation consultant, paid for by the shareholders, to push them into giving him more. He also pushed for（奋力争取）, and was given, shareholder subsidies, not just for his wife's travel on the corporate jet but for the taxes on the imputed income（推算收入） from that travel. Instead of telling Mr Mozilo that he had no business asking the shareholders to subsidise his taxes, the board meekly signed off（停止活动） on it, making it clear to everyone in the executive suite that the pay-performance link was not a priority.

By the end of 2007, when Countrywide finally revealed the losses it had previously obscured, shareholders lost more than 78% of their investment value. Meanwhile, in early 2007 Mr Mozilo sold over $127m in exercised stock options before July 24th 2007, when he announced a $388m write-down on profits. Before the bailout, Countrywide narrowly avoided bankruptcy by taking out an emergency loan of $11 billion from a group of banks. Mr Mozilo continued to sell off（廉价清卖；廉价清仓） shares, and by the end of 2007 he had sold an additional $30m in exercised stock options. There is the definition of outrageously excessive compensation.

Countrywide responded to a shareholder proposal that year asking for a non-binding advisory vote on its pay plan by urging shareholders to oppose it because "Countrywide has been an outstanding performer" and because "The Board's Compensation Committee has access to the best information on compensation practices and has a thorough process in place to determine appropriate executive pay." They could hardly have done worse. And it is likely that some market feedback on the structure of the pay plan could have given compensation committee members Harley W. Snyder (chair), Robert J. Donato, Michael E. Dougherty and Oscar P. Robertson worthwhile guidance.

These may be anecdotes, but they are illuminating ones. The numbers and details may be at the extreme, but the underlying approaches are representative. Even as outliers, they still demonstrate the failure of the system to ensure a vigorous, arm's-length system for determining pay and the inability of the system to require an effective incentive programme with a genuine downside as well as an upside.