MAKING IT IN AMERICA, PART II

(h/t Dan Harris at ABC News)

Even Forbes Magazine, which once advertised itself as a "capitalist tool," recognizes that CEO compensation has gotten beyond the free market. Now, aren't the excesses of these people much worse for the "moral values" of America than some poor people living in a ghetto?

Paying For Failure

What does it cost to attract first-class talent to a chief executive job? A lot. What does it cost to hire a clunker? Almost as much.

Neil Weinberg, Michael Maiello and David K. Randall
05.19.08, 12:00 AM ET
FORBES MAGAZINE

You need look no further than Gary Forsee to see why the absurdities of executive compensation rankle shareholders so much. In 2003 Forsee negotiated a pay package to join Sprint as its chief executive officer that promised to leave him rich--whether he succeeded or failed at turning around the troubled long-distance phone company.

Sprint first paid him $6.5 million in cash and stock just to leave BellSouth, where he was the number two executive. Sprint also bought Forsee's house in Atlanta before he moved to Kansas City. Once on the job Forsee was paid between $1.5 million and $5 million a year. His only real claim to fame while running Sprint was engineering the disastrous Nextel merger and watching its stock price tumble from $25 two years ago to $7.40.

At the end of 2007 he was fired "without cause." But he had negotiated well. Sprint gave him $40 million, including a $1.5 million salary through 2009, $5 million in bonuses, stock options and restricted shares worth $23 million and an $84,000-a-month pension for life.

Oh, Sprint also paid for "outplacement services" that landed him the presidency of the University of Missouri (where his annual salary and bonus amount to $500,000).

"It's like a fourth-grade soccer league where everyone gets a trophy. You can't call it pay-for-performance," says Nell Minow of the Corporate Library, a governance handicapper.