Your math makes the excessive pay seem insignificant.
But let's look at real world examples. Most people work their day jobs for a wage that will increase with good performance. If their performance is poor they will not get a raise, or they may get fired. Key point is many jobs base comp on performance.
Obviously the world of REITS is different. Most execs are paid based on assets managed. IMO this is not the most effective incentive to use. Under this model they can just keep issuing more common shares and their comp goes up...irrespective of how effectively (or ineffectively!)they utilize that new equity.
Many focus on the yield of a stock and say it's still a good yield. They also say...""but the new offering is accretive to BV" which in most cases it is. But for us shareholders the bottom line impact is how much we receive in dividends and what's the value of the stock we own. Both these variables have decreased significantly over the past 2 years for NLY. The 52 week high is 18.79 and the stock is currently at 16.48 for a 12% decline. Has Mike's pay declined by 12% over the past year...NO. The same can be done with the dividend decline. So we shareholders (or owners of the company) have lost value and income while our CEO is paid an increasing comp. Something is wrong with that picture.
IMO a performance based pay model should be used not only for Mike F. but all REIT CEO's. They should win when we win and they should lose when we (the owners) lose. Then we will see how good they are at managing the company not just growing the equity through SPO's.
Many of this board battle over whether NLY or AGNC is the better REIT. That's a whole separate issue. But just lookj at AGNC with a 52 week high of 32.46 and the current price is 32.08. And the yield is 15.6%. Both are far better ressults than NLY over the past year. My point is that AGNC seems to have done a better job of managing their company and had a positive impact foi their owners than Mike has done for NLY.
Bottom line IMO put Mike and all the execs on a performance based comp plan and let's let them earn their pay thru positive performance for us shareholders.
----------- IMO a performance based pay model should be used not only for Mike F. but all REIT CEO's. They should win when we win and they should lose when we (the owners) lose. Then we will see how good they are at managing the company not just growing the equity through SPO's. --------------
then your opinion has been fulfilled... M. Farrell's bonus (what people are talking about here) is tied directly to book value and nothing else.
meaning if he makes double, (which has happened) we get a stock shares with actual value that has doubled...
so instead of hoping for his pay be 5 million, (which would mean that our stock value would then be $2.25, instead of $16)... i hope you can see how counterintuitive that would be fore someone to hope that... you should wish his pay were $100 million, because the only way it will be that, is if your stock value were $48 a share.
say.what: I agree that $35 million a year is excessive compensation for anyone. Shareholders don't revolt, however, because first of all the top three executives are the founders of the company and set the rules. Secondly, the few cents that their compensation reduces our dividend really is insignificant if they can keep in the black over the long term, which so far they have done.
Performance based compensation sounds good, but there are many ways that this can be manipulated and it usually is. It encourages short term risk taking, accounting tricks, timing of disclosures, and share buybacks, to name a few practices that enhance earnings (dividends) and/or share price. Right now, NLY could increase leverage, for instance, and increase earnings but add risk which this conservative management is loath to do.
If there were some mechanism to go back and confiscate the performance based compensation that lead to disaster, I would be all for it. But as it is, our executives reap their rewards and move on with no penaly for their recklessness.
What system of compensation do you advocate which is not subject to manipulation?