Recommended Reading - The Right Way to Pay the CEO of GM, Forbes

Jack Dolmatt-Connell, an executive compensation consultant, wrote a totally on point piece for Forbes on the best way to structure the pay for General Motors’ CEO. Unlike so many CEOs at public companies, Dolmatt-Connell suggests the following (which I wholeheartedly agree with):

The new CEO’s pay should be tied to his or her performance and linked to the company’s recovery, not just awarded to be competitive.

It should be put together the way private-equity-backed firms do it. That is the best model for creating a true risk-reward proposition. It is elegantly simple, featuring modest base salaries and bonuses, significant upside potential via stock options that promote shareholder value creation, little to no downside protection in the form of severance arrangements, and a required personal investment in the company.

Such a pay structure can be easily understood by investors and taxpayers, and it creates a laser-like focus on significantly increasing enterprise value and guiding the company toward becoming a stable, viable and competitive organization that repays the taxpayer. With this plan, shareholders and taxpayers win, but the CEO and executives also win, and potentially win big. If the CEO doesn’t succeed, he or she gets very little, and the taxpayers’ loss is minimized.

The auto companies are not the only firms that should be considering this approach to executive compensation. Let’s hope President Obama’s team considers Dolmatt-Connell’s suggestion on executive compensation. Should GM file for bankruptcy it is imperative a new compensation package be established for all GM executives.

Stay tuned.

Recommended Reading - Can BofA CEO Ken Lewis Keep His Job? Business Week

Dean Foust of Businessweek wrote a story abut the continuing pressure on Ken Lewis, the CEO of Bank of America. For more than a year Liberum has placed Ken Lewis on our CEO Watch. Foust’s piece is a good analysis of where Lewis stands and what might hapen going forward. Check it out.

Recommended Reading - Sir Stuart Rose reshuffles his team at Marks and; Spencer, Times Online

Marcus Leroux wrote a story in the U.K.’s Times Online that examined the dramatic management changes Sir Stuart Rose, the head of troubled retailer Marks and Spencer, has taken to try and turn the retailer around.

The M&S executive chairman effectively promoted two of his lieutenants and announced the imminent departure of a third, as part of measures that he said would accelerate a change in fortunes for the 125-year-old retailer.

…The reshuffle came as the company reported a 40 per cent plunge in profits and a 33 per cent cut in the final dividend.

Carl Leaver, who had led the international division, homewares and e-commerce businesses, is to leave by mutual agreement in the next three months, removing another potential successor to Sir Stuart…

… Steve Rowe is to be put in charge of the online business, while Kate Bostock, head of fashion, has been given additional responsibility for homewares.

Ian Dyson, the finance and operations director, is to be placed in overall charge of the latest initiative to reinvigorate the retailer, called Doing The Right Thing…

… The shake-up suggests that Mr Dyson and Ms Bostock have pulled ahead in the race to succeed Sir Stuart. It is understood the retailer would prefer an internal candidate.

If interested in retailing or what executives sometimes do to try and turn things around check out the story. I have discussed Marks and Spencer and its current Executive Chairman, Sir Stuart Rose, for sometime and believe his moves are worth watching.

Recommended Reading - Banker Pay May Escape Obama Caps As Wall Street Eyes Guidelines, Bloomberg

Christine Harper, Pat Wechsler and Matthew Benjamin wrote a piece today for Bloomberg examining the possibility that the Obama administration may relax the compensation restrictions on the banks that have received TARP money. The restrictions were imposed by Congress after Merrill Lynch executives had received bonuses while the company was floundering and already under purchase from Bank of America. The story quotes Gary Parr, the deputy chairman of Lazard Ltd.,

“It is clear that the government’s going to have to come out with some guidelines on what will compensation be at the big institutions that have TARP,” … “There’s going to need to be something done so that there isn’t a picking off of certain institutions where they’re at a severe disadvantage to others.”

The authors of the story also referred to research by Liberum on turnover in the financial industry and how those numbers might impact Congress’ view on the compensation question. Check out the story if you are interested in executive compensation or the government bailout of the financial industry.

Forbes Editor, Paul Maidment, Refers to Liberum Research on Executive Turnover

Forbes Editor, Paul Maidment put out a video the other day examining some of the recent conclusions put forth by Liberum on the level of executive turnover as compared with overall unemployment.  Check it out.

Recommended Reading - Leadership angst: Who is the new CEO?, Financial Post

Karen Mazurekewich wrote a story for the Financial Post examining the need for new leaders to serve as CEOs.  The writer examined the difficulties that many financial firms and their CEOs have experienced over the last two years.  In the piece the author quotes a number of academics who are pushing for changes in CEO leadership.  

“The world is crying out for a new type of leader,” says Carol Stephenson, dean of the Richard Ivey School of Business at the University of Western Ontario.

Ms. Stephenson says today’s leaders need to be more “collaborative” and “encourage their teams to work across an enterprise or industry.” 

The story is brief but worth a quick read.  

Recommended Reading - CEO pay dives in a rough 2008, USA TODAY

Del Jones and Barbara Hansen wrote a story for USA TODAY assessing CEO compensation during 2008. While overall CEO salaries may have taken a slight hit, they still seem to be raking it in. According to the story,

A USA TODAY analysis of executive compensation data provided by the Associated Press found that the median salary of a CEO running an S&P 500 company rose 3% last year to surpass $1 million. The median bonus and other incentive cash dropped 27% to $1.3 million, and total compensation was down 7% to $7.6 million.

In many cases, it was worse than it looked, because Securities and Exchange Commission rules require companies to value options and other stock grants based on the dates they were granted. According to AP, 90% of the $1.2 billion in CEO options granted last year are under water, which means the current stock price is too low to yield a profit.

… But don’t go looking for CEOs in bread lines just yet. The brutal bear market that hurt them so badly in 2008 could actually help them later by creating ripe conditions for huge potential paydays. Because of 13-year lows in stocks in early 2009, most CEOs received additional stock grants and stock options this year at fire-sale prices.

Decide for yourself what you think, take a look at the story.