Tuesday, August 28, 2012

Proctor and Gamble CEO Robert McDonald Suffers Nearly $1 million Cut in Pay Due to Poor Company Performance

But Wait, Don’t Feel Sorry for the Man Until You Read This

One of the aspects of corporate America that is so upsetting to ordinary citizens is that unlike ordinary citizens the denizens of the top positions in large companies never seem to have to pay for their mistakes or poor management.  About once a week a story comes out about the very high compensation of men and women who produce very poor results for a company and its shareholders.  And when one of these executives fail to such an extend that they are fired, they leave with millions of dollars in severance and benefits, in most cases, tens of millions.

So it is refreshing to see a story about a CEO who has to take a cut in pay because the company performance was weak.  Well, maybe not so refreshing.

Procter & Gamble's chief executive officer had a pay cut of 6.1% for the fiscal year ended June 30, according to a government filing available Friday.

Wow, a 6.1% pay decrease.  For a lot of Americans, indeed for most Americans that kind of drop in income would be at least a major hardship, and for some financially devastating.  But since this is corporate America the devastation for Mr. McDonald is not all that great.

Robert McDonald's pay fell $989,000 to $15.2 million as the consumer products giant missed growth targets amid a worldwide economic slowdown.

So here are the details on just what a CEO who failed to meet financial goals gets these days.

Highlights of McDonald's compensation:
• His salary remained unchanged at $1.6 million; 
• His bonus was $2.4 million, down $200,000, or 7.7 percent; 
• He received $10.8 million in stock and option awards, down $1.4 million, or 11.5 percent; 
• Other compensation rose 69.5 percent to more than $312,000.

Hm, lets see, his bonus was reduced.  Yes there are people who think that a bonus is paid for good performance, but at large companies bonuses are paid for bad performance.  If they were not, the feelings of people like Mr. McDonald might be hurt and they might work less (something that might actually improve performance at the company). 

Notice also that he received $312,000 in ‘other’ compensation.  In corporate America this is referred to as ‘chump change’.  Of course the chumps are the employees and shareholders.

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