Wednesday, April 12, 2006

In The Category Of Big Business Even Screws Itself Over

Advice on Boss's Pay May Not Be So Independent

Not only are top executive salaries corrupt and out-of-control, but it seems that the process, consultants and decisions on setting those salaries are corrupt and out-of-control. Even our top charities are paying outrageous salaries... and I question whether or not any of these folks are wothr the salaries offered.

For Ivan G. Seidenberg, chief executive of Verizon Communications, 2005 was a very good year. As head of the telecommunications giant, Mr. Seidenberg received $19.4 million in salary, bonus, restricted stock and other compensation, 48 percent more than in the previous year.

Others with a stake in Verizon did not fare so well. Shareholders watched their stock fall 26 percent, bondholders lost value as credit agencies downgraded the company's debt and pensions for 50,000 managers were frozen at year-end. When Verizon closed the books last year, it reported an earnings decline of 5.5 percent.

And yet, according to the committee of Verizon's board that determines his compensation, Mr. Seidenberg earned his pay last year as the company exceeded "challenging" performance benchmarks. Mr. Seidenberg's package was competitive with that of other companies in Verizon's industry, shareholders were told, and was devised with the help of an "outside consultant" who reports to the committee.

The independence of this "outside consultant" is open to question. Although neither Verizon officials nor its directors identify its compensation consultant, people briefed on the relationship say it is Hewitt Associates of Lincolnshire, Ill., a provider of employee benefits management and consulting services with $2.8 billion in revenue last year.

Hewitt does much more for Verizon than advise it on compensation matters. Verizon is one of Hewitt's biggest customers in the far more profitable businesses of running the company's employee benefit plans, providing actuarial services to its pension plans and advising it on human resources management. According to a former executive of the firm who declined to be identified out of concern about affecting his business, Hewitt has received more than half a billion dollars in revenue from Verizon and its predecessor companies since 1997.

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