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Obesity Epidemic Among CEO Pay


It's like that scene from Morgan Spurlock's Supersize Me. You known, when he throws up because his digestive system just can't take another Big Mac.

That appears to be what's happening among the nation's CEOs.

They are puking up the super fat paychecks they've gotten over the years.

The most recent example is Stanley O'Neal who is leaving Merrill Lynch after giving it a big fat gift of a $8 billion dollar write-off thanks to risky investments.

The board just can't help but feed this obesity epidemic.

They're giving him $160 million plus in severance for his troubles as he heads for the door.

At some point, the nation's corporations, or most pointedly, their corporate boards, will realize throwing money at their CEOs is probably not the best idea. One study shows that CEOs with lots of cash to build megamansions don't do well by the company's they control.

David Yermack, a finance professor at New York University, actually looked at executives who build megamasions and found that those who do oversee companies that underperform the market.

Why? A Wall Street Journal article stated that the researchers "theorize that some of these executives might be focused more on enjoying their wealth and less on working hard."

We don't know for sure what unbelieveable wealth does to these leaders. Maybe we need a bit more research on the topic.

Unfortunately, the wealth obesity epidemic is spreading. Now we have other institutions thinking they should be following big businesses' lead and pony up big bucks for their head honchos.

Now public pension funds, the funds that many of the nation's state and local workers rely on for their long-term benefits, want to get in on the fat paycheck act. These funds, according to the Wall Street Journal this week, are considering paying their top dogs big money so they'll continue to bow wow wow.

But this time it won't be shareholders who end up holding the bag if these funds go belly up. Taxpayers will end up bailing them out, or state and local workers will end up in the poor house, at least in a worse house since basic retirement benefits will be in jeopardy.

I asked one finance professor about the trend to give public pension fund leaders big money, and he says it's not a great idea.

"Public pension plans are not likely to replace their investment staff when their investment performance suffers," says Stephen D'Arcy, professor of finance at the College of Business, University of Illinois. "Thus, if public pension fund investment managers gain the high pay of industry, they will likely have both the high pay and job security, which means the public plan would be overpaying for talent."

He opposes opening up a plan's check book and giving the leadership staff a ticket to Kobe beef nirvana.

At a time when the chasm between rich and poor is only getting bigger and bigger, and Americans seem to be getting fatter and fatter, it might be the right moment in our history to put CEOs on a diet.

Follow Eve Tahmincioglu on Twitter: www.twitter.com/careerdiva