Den of thieves

Greedy CEOs like Bank of America's Hugh McColl are squeezing the shareholders for gigantic salaries, no matter how the company is doing.

By Merrill Goozner

Mar 23, 2000 | If size is your thing, just flip through the proxy statements of publicly traded companies that will be arriving in mailboxes over the next month or so. The releases provide shareholders with a fleeting glimpse into the surreal world of executive compensation -- where company boards never let tanking stock prices, paltry earnings or massive worker layoffs get in the way of hefty raises and bonuses. CEO paychecks are swelling like never before.

And this year's Oscar for the most undeserved Titanic-size raise goes to Hugh McColl, the 64-year-old chief executive of Bank of America. According to the company's just released proxy, McColl pulled down a compensation package worth nearly $50 million for his 1999 performance, which reached its nadir with the layoff of nearly 20,000 employees.

The Charlotte, N.C., company was quick to point out that the bulk of the package consists of stock options, which aren't worth much in the short term, since Bank of America's stock price has fallen by a third in the past year. Why? Despite wholesale layoffs, profits from the merger between San Francisco's Bank of America and NationsBank have fallen below expectations.

But don't weep for Hugh. Presuming the stock posts even modest returns over the next 10 years, he will eventually reap the bulk of his reward.

McColl isn't alone in his ability to turn a disappointing year into a winning pay proposition. As the Wall Street Journal opined in its 1999 review of executive compensation, "Pay for performance? Forget it. These days, CEOs are assured of getting rich -- however the company does."

In Boston, last year's merger of Fleet Bank and BankBoston was a financial bonanza for executives at both firms, if not for average employees and stockholders. A proxy filed last week showed CEO Terrence Murray of the combined FleetBoston Financial Corp. raked in $20.2 million last year in pay, bonus and stock options. President Charles Gifford got a cool $15.6 million, though he is reportedly giving most of that to an unnamed charity.

And there won't be any shortage of charity cases in the Boston area seeking his largess: The day before filing the proxy, the company waved goodbye to 4,000 workers -- about 7 percent of its workforce. Since the merger, FleetBoston's stock has fallen over 20 percent.

Much like the current stock market, executive pay is no longer based on traditional benchmarks of value or equity. Historically, chief executive pay often reflected a reasonable ratio to that of average workers. In 1960, for instance, that ratio stood around 40 to 1; and by the end of the go-go 1960s, it had risen to about 80 to 1. Though the downbeat 1970s knocked the ratio back to 40 to 1, the chief executive pay ratio soared during the "Me" Decade of the 1980s, peaking at 85 to 1.

While Michael Milken's $600 million one-time haul in 1986 is still an eyepopper, his 1980s peers were pikers compared with today's corporate paymeisters. By 1998, according to Business Week, the average CEO compensation package, including bonuses and stock options, had multiplied to 419 times the average worker's paycheck.

And if, when that information is disclosed this month, the 1999 increases are comparable to the 28.5 percent hike of 1998, that figure will reach 538 to 1 by the time this proxy season is over. To see today's executive compensation packages, you would think the Dow was already trading at 36,000.

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