WWWD -- What Would Warren Do?

The perception and reality of corporate compensation

Bless me readers, for I have contemplated. My last missive was yesterday. These are my thoughts:


It's not as uncommon as one might think to find some good information in a column in the New York Times. Now, most often the good information comes from guest op-ed columnists with a view contrary to that of the Times' muckamucks but today the surprise came from the Times' own Nicholas D. Kristof, who writes about the enormous compensation packages that continue to be doled out to under-performing corporate executives.

Before you read the rest of this post, you really need to read his column because the rest of this post is what I have written Kristof in response to his column. Just select that link on his name in the paragraph above. It will open in a new window. If the New York Times makes you sign up for an account to read it, do it. It's painless, worth your time regardless of your political leanings and, best of all, free. Sometimes you get what you've paid for -- nothing -- but every once a while it provides grist for your commentary mill. And I've never been spammed by them in the several years I've had an account there.

Finished reading his column? Okay then, good. Here's my e-mail to him:

Dear Mr. Kristof:

It's interesting that you look at CEO compensation packages in your March 19, 2005 column but decline to address the golden parachutes I'm sure are attached to the backs of the Toys 'R Us executives in that company's sellout agreement with Kohlberg Kravis Roberts et al.

The Toys 'R Us execs say they can't compete with Wal Mart so they are selling the company to KKR and some other partners for $6.6 billion instead of actually running the company -- cutting prices, reducing the costs and actually competing with Wal Mart, which I would think would be better for the shareholders, consumers, employees and toy makers. Those parachutes must be platinum. It's not like Toys 'R Us has an upscale image like FAO Schwarz. It's a mass merchandiser that was formed to put Mom & Pop toy stores out of business.

On the flip side of the coin, maybe the brass ring of the CEOs you mention in some cases compensates for all the failures they took on the financial chin gaining the experience to attain their positions in the first place. There are few overnight success stories. We're paid much less than we're worth when we are worth it and much more than we're worth when we're not but have a reputation for being good that is saleable at the time of negotiation.

I used to run a software company. And because of my disgust of greedy executives, I made a pact that haunts me still today. When I took over the company, I made a pact with the investors that never got to the legal contract phase. Verbal assurances only. I earn a salary of $36,000 annually but it stays on the books and I take out only enough to cover minimal living expenses, carried as an advance, and I don't get the back salary unless they earn their investment back or they sell the company. If the company makes it, I get the option of acquiring 51 percent of the stock. It was a tremendous gamble, monthly expenses were through the roof, contracts existed that put us at an extreme disadvantage, and there was little money for marketing.

The company was in rough shape when I took it over -- the previous president had pulled $8,000 a month consulting fee to screw the pooch so to speak and never saw three months of consecutive net profit until after I came on board as marketing manager -- but I kept it going and alive with a chance of hitting it big for five years after that, launching two new products and relocating the company twice. The investors even invested more money during that time and never got paid dollar one. Eventually the investors sold the company to take a tax writeoff on their investment in their native Sweden (and) to control copyrights and trademarks. As I wrote, the original agreement never got to the written legal stage -- money for the lawyer was money I couldn't use in marketing the company's products. So I got the short end of the stick when the investors bailed. They were Swedish and there wasn't much I could do here. But I couldn't blame them; they had taken a serious hit too.

I made no money, incurred a debt and a credit record no one would want. I have the experience, and had the adventure, and that alone should make up for the financial remuneration. But vestiges of that time follow me to this day, not the least of which is a seething anger and guilt. Anger and guilt that I had given my word to the investors and that company took precedence over me being with my late mom to help her when she was going through chemotherapy and radiation treatment for her breast cancer. She was an honorable woman, had worked hard her entire life to raise two sons on her own, help people as a nurse, made it to the top of her game becoming a nursing administrator at a community hospital and president and chairman of the Connecticut Nurses Association only to die bankrupt, never travelling to the Greek Isles like she wished. And anger and guilt that I couldn't pay her the $5,000 I had borrowed from her and that her medical bills eventually sent her into bankruptcy, the stress of which I am sure contributed to her depression and death. And it's taken me nearly 10 years to (publicly) admit this.

Why did I do it? Ego, undoubtedly. The experience of calling the shots, definitely. The potential of catching the brass ring, you bet. But most important was the company's products, they were children that helped solve some of society's problems and deserved a future, even at the cost of my own financial destruction. I thought that small company had a chance at life and, looking back, I doubt it ever did.

If tomorrow I were named to run Disney or Compaq and earn a few million doing it, I'm sure the pundits would blast me for ripping off shareholders with an outrageous salary. And they'd be right. But they'd also be wrong.

If I were on a little known congressional oversight subcommittee wanting network news face time to buttress my chances of re-election in the next election cycle I'd try to get a law passed forcing chief executives, on their appointment, to wear a bracelet as a mantle of their power and responsibility with the letters "WWWD" -- What Would Warren Do? -- as in Warren Buffett.