Performance not always key factor in executive compensation - The Ottawa Citizen Nov 12, 2008

Excessive
executive compensation is the issue that just won't die. Like a brush
fire, it smoulders along quietly for a few years, then flares into
periodic firestorms of outrage, recrimination and demands for reform.
Prior to the current banking crisis, the last such flareup came in
2003, when it was revealed that Richard Grasso had been paid $140
million U.S. over a period of eight years to run the New York Stock
Exchange.

Interestingly, Grasso hadn't done anything illegal or
even unethical, and was far from the most highly paid chief executive
in the country. What galled investors, shareholder rights activists and
the general public was that Grasso was being paid a CEO's salary -- and
a healthy one at that -- without a typical CEO's responsibility. As a
regulated exchange, the NYSE, for all intents and purposes, ran itself:
Little or no risk, yet for Grasso, massive reward.

Now, with the
U.S. prepared to spend about $700 billion bailing out faltering
financial institutions, the issue of executive compensation is once
more front and centre, with some of the U.S.'s most high-profile, and
highest paid CEOs being hauled before Congress to explain why, for
example, Lehman Brothers paid out millions in bonuses to senior
executives days before the venerable Wall Street icon filed for
bankruptcy.

Interestingly, while the flare-ups provide occasionally sordid peeks
into the self-serving, self-perpetuating world of corporate governance,
and perhaps offer some opportunity and momentum to once again tackle
the issue of outsized executive compensation, the genie of runaway
executive pay has so far proved all but impossible to stuff back in the
bottle.

And when we say runaway, we mean, like, Donovan Bailey
runaway. Consider that in 1980, CEOs in the U.S. earned about 40 times
the salary of average workers. Twenty years later, that ratio had
ballooned to more than 500-to-one, a rate of pay that legendary
Montreal fund manager Stephen Jarislowsky was already calling
"obviously ridiculous" back in 2003.

No kidding. And yet today, the ratio sits at closer to 600-to-one, with no end in sight.

Nor
is the situation much improved here in Canada. The Financial Post
Magazine's annual list of top-paid and top-performing chief executives
(note: the correlation is sketchy at best), says average CEO
compensation was $7.9 million last year, up 23 per cent from 2006.

The
main culprit, it appears, is the old bugaboo of stock options, which by
now comprise 61 per cent of total pay among Canada's top 200 CEOs. The
inflationary influence of options on executive compensation is
particularly evident in the list of top earners.

Take the case of
Potash Corp. of Saskatchewan Inc. CEO William Doyle. Back in 2005,
Doyle was paid a relatively modest $4.6 million for running Potash Corp.

By
2006, that figure had escalated to $106 million, and last year, Doyle
became Canada's highest-paid CEO, with total compensation topping $320
million.

A further breakdown of the various components of his pay
package tells the story. Doyle was actually only paid a little more
than $1 million in salary last year, and received no bonus money at
all. However, he did receive approximately $9 million in "other"
compensation, and the value of his stock options came in at a whopping
$310 million.

The question, given that stock options are meant to align managerial
interests with those of shareholders, is whether Doyle delivered value
for his outsized pay packet, and on the surface, the answer would
appear to be "yes." After all, between 2005 and 2007, Potash Corp.
shares appreciated by more than 500 per cent.  MORE...http://www.canada.com/ottawacitizen/news/bustech/story.html?id=3c6a8868-396f-432c-be31-83bca461c36b&p=2