Was 2008 a turning point for CEO salaries?
In its annual analysis of CEO pay, released today, the Associated Press discovered that two CEOs, Chesapeake Energy (CHK)'s Aubrey McClendon and Motorola (MOT)'s Sanjay Jha, received over $100 million in 2008. In spite of these record paydays, however, median CEO income dropped 7 percent from the previous year.
2008 demonstrated a fundamental problem with executive compensation: in the standard model that has evolved over the last few years, executive base salaries tend to be comparatively low, but are bolstered by cash and stock bonus packages that are, in concept at least, tied to performance. The idea is that by linking personal rewards to the company's growth, bonus-based executive compensation will encourage decisions that help drive the stock up in value.