Executive relocations hit the bottom lines of the public companies

Filed under: Management, Insiders, Housing

Executive compensation gone wild is a major pet peeve of mine. And if seven-figure pay packages plus restricted stock and options and country club memberships aren’t bad enough, some executives are now sticking their companies with the losses on homes they bought.

Here’s how it works: A company wants to hire a new CEO but she’ll have to relocate to take the job. So the company concurs to make up any loss on the sale of the home. In this real estate market, that’s becoming more of an issue. Qwest (NYSE: Q) lost $1.8 million on Edward Mueller’s old home.

Part of me doesn’t think this is such a massive deal. If that’s what it takes to recruit the executive, and the board is aware of the potential liability, it isn’t really any different from a higher salary. Current SEC rules that require companies to provide a summary compensation table showing the total value of the top officers’ pay packages including all perks make this less of an issue.

Of course, some pay critics are using this as an chance to jump on the greed of executives and the supine nature of corporate directors. But the focus should remain on corporate governance and the fact that executive pay is too often absolutely unrelated to performance. Issues like relocation benefits make for good stories, but they’re really not the issue.

Share This

Share This

This entry was posted on Tuesday, May 27th, 2008 at 10:11 am and is filed under Real Estate and Housing. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.