It’s no secret that the public is grumbling against corporate America a lot these days. But as workers struggle over wave after wave of downsizing and outsourcing, the loudest howls of protest are over extravagant compensation packages. That’s not surprising, given the growth of income inequality in the U.S. — a trend driven at least in part by rising CEO paychecks.
U.S. CEOs of S&P 500 made more than 331 times the average salary of their workers last year (and 774 times more than minimum wage employees), according to a survey by the AFL-CIO.
But wait — there’s more. Companies that pay their chief executives the most see the worst results for shareholders, according to a study by the University of Utah’s David Eccles School of Business. CEOs with annual compensation of more than $20 million lose their organizations an average of $1.4 billion per year.
The authors, who tracked 17 years of executive compensation, noted that platinum compensation packages lead to overconfident CEOs — and overconfident CEOs are more likely to make bad decisions. One counterintuitive fact from the study: When the lion’s share of compensation is in stock rather than cash, CEOs actually perform worse than their peers.
Here are three CEOs that need to do more to earn their keep.
Charif Souki, Cheniere Energy (LNG)
If you’re looking for the highest paid CEO in corporate America, slide your gaze toward Cheniere Energy’s (LNG) Charif Souki. A majority of shareholders, however, balked at Souki’s compensation in a “say for pay” vote last month. Although 87.7 million votes were cast against LNG’s 2013 executive compensation (compared to 75.9 million votes in favor) the company is not required to make any changes in compensation.
Still, LNG ignores the “say for pay” vote at its own peril. The vote comes at a time when Cheniere is grappling with an investor’s lawsuit over $2.1 billion in stock awards. The lawsuit, which was filed in May, seeks the return of 25 million shares of LNG stock.
LNG, which earlier this year gained federal approval to export liquefied natural gas to non-Free Trade Agreement countries, stands to reap the rewards from sending cheap shale gas overseas. The company’s Sabine Pass export terminal in Louisiana could be up and running as early as next year — a big deal in a market that could quadruple between now and 2019.
That said, Cheniere is still struggling with declining net income and sluggish earnings, and the stock recently was downgraded from “Hold” to “Sell.” It doesn’t help that LNG reported $267.2 million in revenue and a $507.9 million net loss attributable to common stockholders in 2013.
Eddie Lampert, Sears Holding (SHLD)
Stock: $4, 309,423
It has been a rough couple of years for hedge fund wizard Eddie Lampert, the man largely responsible for merging Kmart and Sears Holding (SHLD) back in 2005 when he was still at Goldman Sachs.
Lampert had a vision to revive the retailer’s flagging fortunes — closing underperforming stores, investing in its digital commerce initiatives and spinning off Lands’ End. So far, those tactics have failed to right the ship and a lack of adequate investment in brick-and-mortar stores has accelerated the declines in same-store sales and racked up substantial losses.
Lampert’s ESL Investments fund has bet big on a turnaround for SHLD – and that’s one reason SHLD’s board tapped Lampert to take over as chairman and CEO. While Lampert’s compensation is lower than most, he has struggled mightily to react to myriad fires — including the exit of Sears Canada CEO Douglas Campbell.
Three insurers — Euler Hermes Group, Coface SA and Atradius Credit Insurance — have already either refused to back any SHLD creditors or are planning to reduce exposure to creditors, according to InvestorPlace’s John Divine.
Faced with rumors that SHLD’s vendors could jump ship ahead of the make-or-break holiday shopping season, ESL lent SHLD $400 million. Instead of reassuring shareholders, SHLD stock plummeted more than 8% on Thursday — a sign that Wall Street might be viewing the loan from Lampert’s hedge fund as an effort to buy its way out of a bad bluff.
Jamie Dimon, JPMorgan Chase (JPM)
Let’s say you’re on the board of a massive multinational bank holding company (part of which is the largest U.S. bank) and your “fortress balance sheet” gets roughed up by scandals, criminal probes, a fiasco in mismanaged derivatives and more than $23 billion in settlements.
Your first inclination: Tell the guy in charge not to let the door hit him in the butt on the way out. Unless that chairman and CEO is financial services wunderkind Jamie Dimon. Instead, JPMorgan Chase’s (JPM) “Mr. Teflon” got a 74% pay raise.
Missteps on Dimon’s watch range from the $6.2 billion “London Whale” rogue derivatives mess to failure to notice — Bernie Madoff’s Ponzi scheme. JPM has been burned for billions of dollars related to Bear Stearns mortgage-backed securities trades and settlement costs and fines have also mounted into the billions. Add to that the menace of cybercrime and data breaches, and it’s clear Dimon has a lot of work to do to earn his pay.
Still, Dimon has a long reputation for slogging through the worst muck and mire and emerging unsoiled, and there’s little reason to doubt that he will continue to do so — as long as JPM can keep shareholders happy.
As of this writing, Susan J. Aluise did not hold a position in any of the aforementioned securities.