Given the massive bonuses that America's largest companies pay out, it's often hard to believe that corporate boards are doing the jobs — namely, looking out for the shareholders' interest — rather than doing the bidding of senior executives.
After all, does it really take so much corporate treasure to retain talent, even in an era of widespread cuts and government bailouts?
Take a look at the case of Nabors Industries Ltd., where a CEO's value apparently exceeds the company's profits.
Nabors' board late last week approved a bonus of $100 million in cash for Eugene M. Isenberg, its chairman and chief executive, the Wall Street Journal reports. The company's 2010 net income: $94.69 million dollars.
Nabors longer-term performance is hardly stellar. In 2009, it lost $85.5 million. In 2008, when the industry was still riding the boom, it earned $475.75 million, according to Google Finance.
Never heard of Nabors? That's not surprising. This oil services company had 2010 revenues of just $4.2 billion. That's less than one-sixth the revenues of sector leader, Schlumberger, whose CEO earned $14 million last year.
Hmmm: small-ish company; modest performance. How did exactly did Naspor's board justify the payout as being in the best interest of the shareholders?
As compensation for a demotion. They removed Isenberg, 81, from his day-job as chief executive, although he will remain chairman. As is often the case, the $100 million golden parachute was negotiated in advance, in the executive's 2009 contract. In the twisted logic of heliospheric wealth, Isenberg somehow convinced the board in advance that his departure would be worth a lot of money to the company.
The Wall Street Journal has this remarkable quote:
Asked how Mr. Isenberg took the news that he would no longer be CEO, Mr. Comfort said: "Just like you would. If this is your life, clearly this is not fun for you."
Amazingly, this isn't even Isenberg's biggest payday. On four previous occasions his pay has exceeded $100 million. In 2005, it topped $200 million. By comparison, last year's highest paid U.S. executive was Viacom CEO Philippe P. Dauman, who "earned" $84.3 million.
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