Sorry, I'm Keeping the Bonus Anyway

[LiviaOlivia]

The New York Times
March 13, 2005
Sorry, I'm Keeping the Bonus Anyway
By JONATHAN D. GLATER

WILLIAM A. WISE hit the jackpot when his company hit its number. After the El Paso Corporation, the energy company in Houston, reported a profit of $93 million in 2001, Mr. Wise, its chief executive, was rewarded with a $3.4 million bonus, 768,250 stock options, $1.7 million of restricted stock and $3.7 million in "other compensation." And that was on top of his regular salary of $1.3 million. Just two years later, however, El Paso had this to say about its performance leading up to Mr. Wise's big payday back then: Oops!

El Paso's board ousted Mr. Wise in 2003, and last year the company reported that it actually had a loss of $447 million in 2001. As it turns out, the company said, "certain personnel used aggressive, and at times, unsupportable methods to book proved" oil and gas reserves. The numbers for other years were wrong, too, it added. Now that the record has been set straight, will Mr. Wise be giving back all that extra money he received for meeting his performance goal - hitting his number, in industry parlance - when, in fact, he didn't even come close? Not a chance. And therein lies the rub.

Hundreds of companies have restated earnings in recent years - 414 in 2004 alone, according to a recent study by the Huron Consulting Group. And in many cases, the revisions came in the wake of discoveries of questionable accounting or other possible wrongdoing that meant the numbers leading to bonuses were inaccurate. But a review of restatements by large corporations shows that companies very, very rarely - as in almost never - get that money back. The list of restatements was compiled for Sunday Business by Glass Lewis & Company, a research firm based in San Francisco.

~snip~

Shareholders might have hoped that legislation passed in 2002, in the wake of corporate scandals involving Enron, WorldCom and others, would help them recover some of their losses from the executives who grew rich on stock prices inflated by incorrect earnings reports. Those hopes have proved as false as the financial reports themselves. The law, the Sarbanes-Oxley Act, requires top executives to pay back bonuses if the numbers on which they are based were incorrect. But so far regulators have not enforced the provision, in part because the law took effect only in July 2002.

~snip~

http://www.nytimes.com/2005/03/13/business/yourmoney/13restate.html

[Trillo]

1. The simple fix is not to give them the kind of money

that anyone much cares about getting back.

Minimum Wage?

[Enquiringkitty]

2. Corporation wouldn't need tax cuts and hand-outs if they paid

a reasonable salary to those people. It's absurd what they make and why? They should get paid a median salary of their employee salaries. Would be a good reason for their employees to make a higher wage nothing like incentive to make a CEO work harder.