(Host) Commentator Timothy McQuiston finds some unsettling similarities between baseball and health of American corporations.
(McQuiston) CEOs and major league baseball players may be good, even very good, at what they do. In some cases, especially in the case of shortstops, they can be vital to the firm, even though they all make profoundly more money than they deserve. But at least Nomar, A-Rod and Derek Jeter, despite the fact he’s a Yankee, put people in the stands.
The value of CEOs is much less certain. We know baseball players would work for a lot less than they’re making now. But they’re taking what they can get. Isn’t the same true for CEOs? IBM’s recently retired Chairman Louis Gerstner earned two million dollars in salary last year, $12.6 million in total cash compensation and owns about $12.5 million in stock. I’m betting he’d have worked for half the pay.
Well, what we do know is that CEOs can destroy a company. WorldCom and Enron are in bankruptcy in large part because of the hijinks directly related to their top executives. The family that use to control Adelphia Cable borrowed millions of dollars from the company in part to buy the Buffalo Sabres hockey team. Apparently, however, they didn’t borrow enough, because they let goalie Dominick Hasek go to the Detroit Red Wings, where he won the Stanley Cup.
I was one of those business analysts in the early 1990s who believed that executive compensation should be based on the performance of the company. Profits and stock prices would be the ultimate judge of how well a CEO performed when he stepped to the plate. I was wrong then, and I’m not sure how to be right now. As we’ve seen over the last year, executives can too easily manipulate the numbers, the stock price and their own pay.
Vermont’s publicly traded companies have avoided scandal, and executive compensation here seems like pocket change compared to the national giants. Right now, Green Mountain Coffee’s Robert Stiller is king of the Vermont hill. Although his salary is down the list a bit compared to his peers, he owns about 64 million dollars in stock. But at least he built the company from very modest beginnings into a growing coffee company. His accomplishments are tangible. That’s not the case with most CEOs.
A friend of mine who’s a criminologist says the greatest deterrent to white collar crime is the threat of jail time for offenders. With that in mind, and with an eye on the November elections, Congress and President Bush rushed through a law that includes criminal prosecution for crooked corporate executives.
Alex Rodriguez of the Texas Rangers makes $25 million a year even though the team stinks. Baseball is going broke and talking seriously about another players’ strike. Corporate America, like baseball, is an institution in serious trouble.
Maybe greed, for lack of a better word, isn’t good. Maybe greed doesn’t work.
This is Timothy McQuiston
Timothy McQuiston is editor of Vermont Business Magazine.