- About 40 percent of American CEOs found themselves in hot water over the past 20 years due to poor performance
- Though fired for their ineptitude, eight per cent received ‘golden parachutes’ worth an average of $48million
By Ryan Gorman
PUBLISHED: 22:47 EST, 28 August 2013 | UPDATED: 01:52 EST, 29 August 2013
A significant number of America’s highest-paid chief executives have found themselves in hot water over the past 20 years, according to a new study.
Roughly 40 per cent of CEOs among the 25 highest-paid in the US have been fired, fined or bailed out, according to the report released Wednesday by the Institute for Policy Studies. This finding comes despite their astronomical pay – about 354 times the average – coming with an expectation for sky-high performance.
Companies paying a premium for elite talent often do not realize the return they expect, the report says. In at least one instance, a CEO ended up with a conviction that would have led to jail time had he not died before sentencing.
Defiant to the end: Former Lehman Brothers Chairman and CEO Richard ‘Dick’ Fuld testifies to Congress about the firm’s collapse
The non-profit analyzed the 25 highest-paid CEOs for the each of the past 20 years and found that almost half of them had paid some sort of price for their poor performance.
Of the CEOs on the list, eight per cent were fired, but received ‘golden parachutes’ averaging $48million each upon their exit, according to the report.
Of the fined, eight per cent ended up costing their firm’s over $100million in fines each, with one CEO paying fines out of pocket, for stock option back-dating, according to the report.
Most scandalously on the list are financial executives, all of whom ‘were forced to receive bailouts for running their companies into the ground,’ according to the report.
In fairness, financial industry CEOs didn’t have much of a choice when it came to bailouts received though the Troubled Asset Relief Program (TARP). All large banks received TARP bailouts whether they wanted/need them or not.
The most publicized of those was Lehman CEO Dick Fuld. While Fuld pocketed over $466million in compensation between 2001 and 2007, according to Reuters, he reportedly contributed to the once prestigious firm’s spectacular 2008 collapse.
Busted: Former Enron Chairman and CEO Kenneth Lay was convicted of 10 counts of securities fraud and conspiracy, but died of a heart attack before sentencing
Even more notorious is Kenneth Lay. As Enron CEO, Lay saw the firm rise to prominence on the back of predatory energy trading and book cooking the likes of which was unprecedented in American history.
While handsomely reaping the benefits of a top 25 CEO, Lay oversaw the greatest corporate bankruptcy in American history, prior to Lehman. Enron’s collapse put thousands out of work, wiped out the pensions of many life-long employees and resulted in a Houston federal jury finding the chief executive guilty in 10 counts of securities fraud and conspiracy. Facing the rest of his life in prison, according to the New York Times, Lay died of a heart attack before his sentencing.
The report suggests that reigning in CEO pay is the only answer to this problem.
Reforms surrounding the disclosure of CEO to worker pay ratio and pay restrictions on financial firm CEOs specified in Dodd-Frank legislation still not yet implemented three years after President Barack Obama signed the bill into law are suggested.
Another suggestion is closing the IRS loophole that allows companies to deduct executive compensation from payroll taxes, which the report calls a ‘outrageous.’