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Severance When CEO Gets the BootEditor’s Note: In an Online Conversation with the Editor, “It Worked for Spitzer,” CE asked [...]

December 11 2008 by Chief Executive


Severance When CEO Gets the Boot

Editor’s Note: In an Online Conversation with the Editor, “It Worked for Spitzer,” CE asked what should be done-apart from having ambitious attorneys general demogoging business leaders-about generous severance and bonus payments when a CEO gets the boot for poor performance.

When I rejoined MBIA as chairman and CEO in February of this year, the issue of CEO compensation was already well on its way to being the topic of the day. As such, the MBIA board approached the structuring of my compensation reflecting what we believe will be best practices going forward. You can see the details of how I am being paid in our proxy, but a couple of key provisions demonstrate that the only way we can avoid having the government tell us what to do is to lead by example. In my case, there is no contract, there is no severance and there are no golden parachute provisions. In the case of my restricted stock award, it vests on a pro-rata basis depending on stock price and would only go into effect if the shareholders approved it at the next annual meeting. I was obviously pleased that over 90 percent did so last May, which confirmed my belief that owners are not afraid to pay their CEOs well if the performance materializes.

I am not looking for any recognition that we are leading the way on this issue, but thought you would like to know that some firms are doing something about it. 

Jay Brown
Chairman and CEO
MBIA
Armonk, N.Y.

Senior Teams Need Training, Too

The roundtable “How Effective Is Your Senior Team,” (September/October 2008) addresses a critical issue that has challenged CEOs for decades. It re-emphasizes the point CE made in an earlier article, “Teamwork Starts at the Top” (April 1991), “rarely do we read of teamwork at senior executive levels.” Although most CEOs have subordinates who make up their executive team, the latter are often unable to function effectively as team members. Most of these executives lack training in participating on teams. Until this need is met and the executives have a part of their performance evaluation based on their contribution to the team, little progress can be expected in this area. 

Roy Serpa
Fairview, Texas

Pandemic Preparedness

George Abercrombie’s “Pandemic Proposal” (July-August 2008) reminds us all of the importance of including pandemic preparedness considerations in every company’s business continuity planning. Most experts agree that a serious influenza pandemic will occur at some time in the future and preparedness efforts will save lives and ensure that critical infrastructure is maintained. Many of Mr. Abercrombie’s points are well taken. However, I and the Occupational Safety and Health experts at my firm felt the article glossed over two matters worthy of attention.

First, businesses should, as Mr. Abercrombie urges, partner with government at the federal, state and local level to hammer out plans that will protect employees and business processes in a pandemic. But as is often the case, the devil is in the details. While the article was likely not intended to be all encompassing, it is important to note the numerous essential components of responsible and effective pandemic preparedness planning. The article does not mention these elements, and focuses exclusively on stockpiling antivirals without mentioning the considerable barriers to doing so. The U.S. government is aware of these barriers, including the cost of buying, storing and dispensing the medication; the drugs’ shelf life; potential liability concerns for employers; logistical issues; and the potential for local or state government seizure of stockpiled drugs. According to a recent government report, several federal initiatives have been launched in an effort to reduce these barriers.

Second, a pandemic would be devastating to our society and our economy. A subject of this significance would be better covered within a broader context and with numerous sources. Mr. Abercrombie, the author of the article, is president and CEO of Hoffmann-La Roche, a company that produces antivirals. By not having multiple viewpoints or extending the dialogue beyond the discussion of employer stockpiling, Pandemic Proposal may put a serious topic at risk of being dismissed as potentially self-serving.

I urge Chief Executive to follow up with an article outlining the elements of a pandemic preparedness plan and reviewing not only the barriers to antiviral stockpiling, but viable solutions as well. 

Robert J. Freedman
President and CEO
ORC Worldwide
New York, N.Y.

Wrong on McCain

Your cover story “Why Job Creators Want McCain” (September-October 2008) is not only wrong, but more importantly, a wildly inappropriate article two weeks before a national election. There is an old saying: “Never argue with a man who owns a printing press.” So I will not belabor the many inaccuracies and distortions in Mr. Kopko’s article. I will only say that the narrow view of the world that leads people like Mr. Kopko to consider only their personal financial gain or loss is perhaps the greatest risk to our democracy. For most Americans, eight years of Bush have led us away from four more years of his policies wrapped up in a new McCain package. 

Isaac Stein
President
Waverly Associates
Menlo Park, Calif.

While we appreciate Mr. Stein’s comments, we should remind all that Mr. Kopko was reporting on the views of CEOs as expressed by CE‘s polling of 751 respondents, 80 percent of whom expressed opinions that obviously differ from Stein’s but which are no less valid for that. Furthermore, other facts referred to in the article- interestingly, no examples of any inaccuracies or distortions are cited- were based on extensive polling of CEOs, including their comments taken from polling throughout the year. Mr. Stein’s dispute is with his peers. Given the general feeling, shared by many CEOs, that the recent election was one of the most critical in recent memory, we cannot understand why reporting such views before such an election could possibly be deemed “inappropriate.” CNN, BusinessWeek and Fox News, among others that picked up the story, also thought it newsworthy. 

Stuck in June

It is interesting to read in late October your “Final Word” editorial from June 2008, “Thank the Politicians for High Energy Prices.” Aside from the thrust of the piece, what caught my attention was the comment, “If it weren’t for regulatory barriers, we wouldn’t be in a situation where not a single oil refinery has been permitted to be built in 31 years.” This sounds like a euphemism for blaming “regulations,” which must originate from Democrats, not the far sighted Republicans. (For more on this, see “Final Word,” p. 72.) Since June, it now appears that the whole financial community has suffered because there has been a lack of regulations. In addition to the financial meltdown, your article is a typical and very tired Republican concept that the oil problem would be solved with less government interference. Oh, to bring back the Wild West; let the marketplace work out its problems as practiced by Herbert Hoover. It is often difficult to find articles, when discussing our dependence on oil and the serious problems associated with this, emphasizing our need to generate new, innovative ideas. (See “CEO Watch,” page 14.) Energy related innovations and intelligent strategies certainly have been missing over the last eight years.

On the other hand, I do believe the title of the article is correct (“Thank the Politicians”) based on what has happened over the past eight years. Maybe you are just stuck in the month of June.

Henry M. Buchbinder
Chicago, Ill.