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Borderline
cases abound and thus company founders and active heirs could not be
eliminated just because of their (or their forebear’s) role in the
inception of a corporation. William P. Lauder (Estee Lauder) and
Harold W. McGraw III (McGraw Hill) are third and fourth generation
heirs of their respective companies’ founders, yet they hold
considerably less than 5% of the stock which was obviously
accumulated by exercise of their stock options, more than by
inheritance. They thus qualify for the list, whereas other heirs,
including Jeffrey Lorberbaum (Mohawk Industries) and Willard
Marriott obviously gained their wealth mostly through inheritance.
Some
actual company founders made the list because their wealth was built
up through the exercise of stock options and other compensation
rather than through the appreciation of their initial (founding)
shareholdings. Henry Silverman founded Hospitality Franchise Systems
in 1990 but lost most of his original wealth after its merger with
Comp-U-Card, as a consequence of accounting scandals affecting the
latter in 1998. He subsequently recovered almost $700 million
through the exercise of Cendant stock options which were awarded on
the basis of the depressed values. Other founders who owe their
present wealth mostly to their executive functions are Scott McNealy
(Sun Microsystems) and Steve Case (AOL).
Billionaire
CEOs (or ex CEOs) John Morgridge (Cisco Systems) and “Meg” Whiteman
(eBay), who received their stock options mostly as sign-up bonuses,
also make the list. Not so Microsoft’s Steve Ballmer, who received
the bulk of his stock as a signup bonus back in 1980, before the
company went public, twenty years before he became CEO.
With
CEOs being paid so well, the question legitimately arises, whether
they are worth it. This questions inexorably leads us to put
executive compensation into relation with the return to a
corporation’s shareholders during a given CEO’s tenure. Using such a
model, Forbes has been rating US CEOs since 2002 with some
surprising results.
Interestingly,
some of America’s best paid CEOs are among the worst rated, while
many of the best rated CEOs do not make our list of the richest ones.
If even such notorious wealth creators as Michael Eisner (Walt
Disney) and Reuben Mark (Colgate-Palmolive) get “F” ratings by
Forbes, the quality of our top executives is highly controversial.
This tends to underline our suspicion, that US CEOs get excessive
compensation, as a result of a systemic flaw, rather than because
they are doing so well for their shareholders.
In
recent years, this impression has been confirmed by an increasing
number of scoundrel CEOs, who took shortcuts to deliver their
results and thereby compromised the very existence of the companies
they directed. Enron’s Kenneth Lay and Jeff Skilling, WorldCom’s
Bernie Ebbers and Tyco International’s Dennis Kozlowski are just the
most prominent examples. Blinded by their greed and unchecked in
their power, these CEOs committed multiple corporate crimes, ranging
from option backdating and insider trading to misappropriation of
funds and accounting fraud, depriving their shareholders, and to a
large extent their employees, of the bulk of their life savings.
Hail to the CEOs
> Index
and Introduction
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