Dear Reader


The sky is falling in on the current political administration, but it’s not sitting still. Quite. George W. Bush and company are now attempting to take leadership on issues that they have been fighting against or ignoring for years — issues like global climate change and executive compensation. The trouble is, “leadership” in this case means acknowledging an issue previously denied and then re-framing the solution to fit a particular agenda.
It’s important that the various solutions to both climate change and executive compensation are fully debated in the public and that the long-term ramifications are completely understood, lest we shoot off on yet another trajectory that we will find ourselves cleaning up years hence. Using food for fuel is NOT the only answer to our energy problem, for instance.
On the issue of executive compensation, the Bush administration now advocates (rather loudly) that the time has come for executives to be compensated for “performance.” I shudder at that word, which in modern times has produced everything from Viagra to ergogenic supplements to insider trading. But assume for a minute that there is no substitute for the word – let’s just define “performance” in a way that is “sustainable”. Too often, “performance” for a Chief Executive is synonymous with positive stock price action, no matter the reason. This is not just an incomplete measure, it’s dangerous.
As I write this, Carl Icahn is attempting to gain a seat on Motorola’s board of directors. Icahn made his billionaire fortune in large part because of Michael Milken’s junk bonds. If you were in the industry in the eighties you might remember him – hardly a hero. Now, with his money intact (not being one of those who actually went up the river in the eighties) he owns casino properties, pieces of big things everywhere, and at one point tried to take over Marvel Comics. Icahn’s goal with Motorola is to use all their cash (that’s all their cash) to buy back shares to make the stock go up, since weak earnings have driven it in the other direction. As of year end that looks like around $6.5 billion, some of which might be better used to develop and market a hot new cell phone. By the strict, conventional “shareholder value” yardstick, massive share repurchase alone might make possible windfall compensation for Motorola CEO Ed Zander (who earned a relatively modest salary and bonus of $3,500,000 in 2005 plus stock awards) in a time when Motorola is suffering from lack of competitive product in a highly fickle market.
But I digress. My point is that in awarding executive compensation, if companies measured sustainability of the corporation (defined by its role in protecting its own community and the Earth on which it resides in addition to financial success), – the word “performance” would take on a new and long-term brilliance.