Exxon Mobil reports that it is sending retiring chairman Lee Raymond off with one of the most lavish executive compensation and retirement packages in history — an estimated $398 million in total. This unconscionable windfall cannot be justified by any serious measure of Raymond’s performance, especially since the company’s record-breaking $36 billion annual profits last year had more to do with the Mobil merger, refinery bottlenecks, politically-driven tax breaks and geopolitical events than it did with managerial effectiveness.
The self-dealing that leads to payouts like Raymond’s exposes the failure of corporate boards to protect the interests of shareholders. The conflicts of interest held by compensation consultants and interlocking relationships with other boards of directors make a mockery of any claim to independence. With their rubber-stamp boards, top executives essentially pay themselves, while rendering their shareowners powerless.
The SEC should require that all companies above a certain size put their top executives’ compensation packages up to a proxy vote. If the shareholders believe such pay fails to match performance, they should have a means of signaling the need for restraint. In fact, this reform has been required of British companies since 2002, one reason British CEOs at similarly-sized companies earn little more than half what their American counterparts do.