Huge CEO Paydays in Danger

Gadfly billionaire investor Carl Icahn, a Blockbuster board member and the firm's biggest shareholder, has used his clout to lower the compensation for new CEO Jim Keyes.

Could this be a harbinger, at least, of a more modest payday for top corporate executives?

Previous Blockbuster CEO John Antioco, who left the firm last July, earned $1.4 million in salary and deferred compensation, and a total of $11.6 million in additional payments.

Keyes, who began his tenure in July, is now paid a modest salary of $346,154, and an additional potential compensation of $5.6 million.

That’s quite a step down.

The revolt among shareholders is growing in the wake of the downturn and what some see as the bloated executive payrolls of 2007.

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Last year's average compensation for the CEO of an S&P 500 firm was $14 million, according to data from the Corporate Library, a research firm which tracks corporate filings. Median compensation was $8.8 million.

In 2006, CEOs of U.S. corporations took home an average of $10.8 million — 364 times the pay of an average worker, according to advocacy group United for a Fair Economy.

The trend to cap what some critics have called "excessive pay" for executives, even for firms that posted huge losses, seems to be gaining traction.

So it's no surprise that well-compensated Goldman Sachs Group CEO Lloyd Blankfein vigorously opposes any shareholder meddling — the so-called "say on pay" proposal — in the pay package for CEOs and other C-level execs.

Blankfein was paid an estimated $70 million last year. Although hedge fund managers routinely take away billions, that’s still a lot for a single CEO.

Five of Goldman Sachs' senior execs were paid a total of about $250 million in salary and other compensation, not to mention stock options, another fat source of cash.

Hefty pay packages are the incentives which attract the best management talent, says Blankfein.

And Goldman did post earnings of $88 billion that year under Blankfein, and net income of $11.6 billion

Who sets the pay scale for senior management? Usually, it's the board of directors and a compensation committee.

But shareholders whose equities took major hits recently are not happy with that arrangement now, Icahn among them.

Goldman shareholders want to cap "excessive” pay, too. They want their board and investors to advise and consent on compensation packages, although their recommendations won’t be binding.

Whether or not America's CEOs are worth that kind of money is now being debated, and increasingly shareholders are saying no.

Why?

Mostly because CEO pay in recent times has not reflected their performance. Too many corporations have seen a steep drop in the price of their stock.

Goldman, for instance, is trading around $170 from a 52-week high of $250 a share

We all know some of the reasons for the downturn: the inevitable business cycles of a market economy, alleged Federal Reserve rate-cutting ineptitude under Alan Greenspan, predatory lending in the subprime mortgage calamity, soaring oil prices, and a host of other economic factors.

But few fingers — until recently — have been pointed at overly-compensated yet poorly performing senior management.

Now CEOs and other senior execs will be taking the heat instead of taking the money.

Until of course the good times roll, then the idea of CEO pay cuts could just as quickly evaporate.

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