Holmes Report Blog

The Holmes Report blog focuses on news and issues of interest to public relations professionals. Our main site can be found at www.holmesreport.com.

Friday, August 25, 2006

Home Free: Slate’s Michelle Leder picks up on a new perk for CEOs—one that could be very costly indeed for shareholders if the housing bubble bursts. “Since the beginning of this summer, at least a half-dozen companies, including eBay and Nike, have disclosed in their routine Securities and Exchange Commission filings that they're now protecting their executives from real estate market forces….

“In other words, companies that depend on free markets are making sure their own executives are safeguarded from them.”

There’s likely to be a brief flurry of criticism over this issue, just as there was when it was learned that companies were backdating stock options to their lowest point of the year or quarter to ensure that senior executives benefited from any up-tick. But CEO compensation is one of those issues that seems to be immune to the ordinary laws of reputation management: no matter how great the outrage, CEO pay just keeps on rising.

What amazes me is that this is happening despite the fact that no one seems to know just how much value a good CEO adds to a company, how to isolate the impact of the CEO from all other factors impacting corporate performance, or how transferable CEO skills are (is a CEO who does a great job at X Company likely to do a similar job at Y?

In some respects, what we are seeing here is a corporate version of the “great man theory,” the belief that history is shaped by individuals. That theory is out of fashion in academia, where today’s historians look at a more complex web of social and economic forces to explain events. But it’s still very much in vogue in the business world, perhaps because compensation policies are set by those who either are or have been “great men” themselves.

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