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Director Watch: Putting an End to Blank Checks for CEOs

It is standard for the chief executives of major corporations to pocket tens or even hundreds of millions of dollars a year for their work. This is not just the case for the extraordinary executives who turn around a failing company or bring an important new product to the market. Even CEOs of failing companies can count on paychecks that are several hundred times as large as the paychecks of their typical worker.

CEOs like to tell us that this is just the way the market works and we don’t want to tamper with the market. But this is nonsense on its face.
There is nothing like a normal market for CEOs. The pay of CEOs is determined by the corporate board of directors. In most companies, the members of this board largely owe their positions to the CEO. In effect, the directors are friends of the CEOs. The directors themselves tend to be very well-paid for their work, typically getting several hundred thousand dollars a year for attending 4-10 meetings. This basically means that the directors are paid off by the CEOs to look the other way as they pilfer the company.

If this were just a case of CEOs ripping off rich shareholders, the rest of us could treat the matter as simply another spectator sport. But the public at large actually has a substantial interest in the behavior at the top echelons of corporate America. For one reason, public pension funds own over $2 trillion in corporate stock. The money that CEOs rip off from the companies they run is money that is not going to these pension funds.

There is a similar story with private pension funds, which are ensured by the federal government. These pensions hold more than $1 trillion in corporate stock. And most middle income people now have a 401(k) type plan which is invested at least partly in stock. For these people too, the money taken by the CEOs is money that they will not have to support their retirement.

There also is a broader issue.

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Ernesto Zedillo Ponce de León: Director of the Day Print
Ernesto Zedillo Ponce de LeónDirectorships, 2008 - 2012: 5*

Total director compensation, 2008 - 2012: $3,626,109**

Average annual director compensation, 2008 - 2012: $725,222

Average compensation per full year of service as director: $244,276

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Reed Hundt: Director of the Day Print
Reed Hundt

Directorships, 2008-2012: 2

Total director compensation, 2008-2012: $ 2,688,560

Average compensation per full year of service as director: $384,080

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Lisa Caputo: Director of the Day Print
Lisa Caputo

Directorships: 1

Total director compensation, 2008-2012: $632,208

Average compensation for full year as director: $192,867

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Elaine Chao: Director of the Day Print
Chao Elaine

Directorships, 2008-2012: 3 (Note: This does not include Chao’s service to Twenty-First Century Fox/News Corporation, which she joined in October 2012.)

Total director compensation, 2008-2012: $1,128,466

Total director compensation, 2012: $ 545,275

Average compensation per full year of service as director: $159,257

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Sam Nunn: Director of the Day Print
Sam Nunn

Directorships, 2008-2012: 5

Total director compensation, 2008-2012: $4,579,315

Average annual director compensation, 2008-2012: $915,863

Average compensation per full year of service as director: $274,321

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Richard M. Daley: Director of the Day Print
richardm.daley

Richard M. Daley served as mayor of Chicago for twenty-two years, from 1989-2011, surpassing the record for longevity set by his father. Shortly after ending his term as mayor, Daley became a director of the Coca Cola Company. He received $18,322 in compensation for his time as a director two months in 2011, and $178,461 for 2012.

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Erskine Bowles: Director of the Day
Erskine BowlesDirectorships, 2008-2012: 6

Total director compensation, 2008-2012: $3,295,509

Average annual director compensation, 2008-2012:
$659,102

Average compensation per full year of service as director:
$218,822

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Martin Feldstein: Director of the Day
Martin Feldstein

Directorships over past five years: 2

Total director compensation, 2008-2012: $1,182,399

Average compensation per full year of service as director, 2008-2012: $284,089

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