Chrsysler, has hired former Home Depot CEO Robert Nardelli to run the now-private, once-again-American-owned automaker. Nardelli, of course, did a good job at Home Depot but left after six years when its stock price started to sink. At Chrysler, it’s reported, he’s getting what I think corporate boards should make the base salary for the CEOs of almost all public companies: $1 plus potential enormous bonuses if the company does well. Chrysler may have the least certain future of any really large American company and the fact that it can get a top-quality CEO on this basis shows that other companies can do the same.
Unlike John, I do think that CEO pay is something of a scandal. (Although I really don’t have any quarrel with John’s particular arguments and agree that pay levels in private companies have no place in the public policy realm.)
CEOs who produce profits, growth, and shareholder value deserve huge rewards. But I think that well-run boards should do everything they can to tie CEO pay directly to performance. Far too many boards seem content to let CEOs “harvest” market position and destroy shareholder value: $1 a year jobs should make that easier.