CEOs Who Should -- and Should Not -- Get Bonuses This Year

BusinessWeek

A Bad Year for CEO Bonuses?

For chief executives seeking annual bonuses, this will be a tough year.

Trouble in the economy made it difficult, if not impossible, for even the best managers to meet goals that corporate boards set for chief executives at the start of 2008. And even if corporate boards want to reward CEOs for doing a good job in a bad environment, it doesn't look good to give something extra to executives while employees are being laid off and shareholders have seen stock prices plunge.

The latest example is Merrill Lynch chief executive John Thain. The Wall Street Journal reported early on Dec. 8 that Merrill's board was resisting Thain's request for a bonus of up to $10 million. In 2008, Merrill's stock price plunged, it had to sell itself to Bank of America and thousands of employees face layoffs. Later in the day on Dec. 8, the Journal reported that Merrill would in fact decline any bonus this year.

More from BusinessWeek.com:

Big Bonuses for CEOs? Not So Fast

Managing Your Bad Boss

Why We Need to Limit Executive Compensation

This list examines which high-profile CEOs should get a candy cane -- or coal -- in their stockings. In looking at which execs do or do not deserve a 2008 bonus, we used criteria including profit growth in the past year and stock performance relative to competitors. Another, more subjective factor is public relations and employee morale. A company's image would take a hit if a chief executive gets a multimillion-dollar bonus while other costs are being slashed and employees are losing their jobs. The final decisions on CEO bonuses will be made in the next few months by corporate boards, and the size of bonus payouts must be disclosed in the spring.

(Year-to-date share performance is as of Dec. 2, 2008. Compensation figures reflect total pay, including salary, bonuses and equity compensation for the last fiscal year, according to data provider Capital IQ.)

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1. Kenneth I. Chenault

American Express
2007 compensation: $26.2 million
YTD share performance: -60.09%
Net income, One-Year Growth: -19.8%

American Express has been feeling the effects of the credit crunch: The company set aside $1.4 billion for credit losses in the third quarter, up from $905 million in 2007. Investors are worried that AmEx is too reliant on the credit markets for funding.

Candy Cane or Coal?: Coal

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2. G. Richard Wagoner Jr.

General Motors
2007 compensation: $14.4 million
YTD share performance: -80.51%

Net income rose to a loss of $22 billion in the last twelve months, from a loss of $37.1 billion the previous year.

Wagoner inherited more than 50 years worth of problems when he became GM's CEO. But the lack of a clear business plan for the future and timid steps toward change aren't doing enough to help the company, which turned to Congress to help avoid bankruptcy.

Candy Cane or Coal?: Coal

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TJX

3. Carol Meyrowitz

TJX
Annual compensation: $8.6 million
YTD share performance: -28.65%
Net income, One-Year Growth: 37.7%

While TJX saw slightly lower-than-expected sales in its third quarter due to weak consumer spending, the company is doing everything it can to maintain decent profit margins. Its profit growth is far better than that of any other apparel retailer in the S&P 500. Meyrowitz announced that the company continues to gain market share across the board.

Candy Cane or Coal?: Candy Cane

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4. Indra K. Nooyi

PepsiCo
2007 compensation: $11.8 million
YTD share performance: -28.8%
Net income, One-Year Growth: -8.63%

PepsiCo announced in October that it would be cutting 3,300 jobs after a sizable profit decline in 2008. While Pepsi is suffering from weak U.S. sales, it is expanding its international partnerships and investing $4 billion in China and Mexico.

Candy Cane or Coal?: Coal

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5. Jeffrey R. Immelt

General Electric
2007 compensation: $19.6 million
YTD share performance: -54.19%
Net income, One-Year Growth: -7.22%

Problems at GE's financial businesses have taken their toll, and GE shares are now down 44% from when Immelt took over in September 2001. Investors approved of the company's recent announcement that it will restructure its ailing capital unit, but the move will result in an unspecified number of layoffs.

Candy Cane or Coal?: Coal

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6. John Mack

Morgan Stanley
2007 compensation: $1.6 million
YTD share performance: -77.89%
Net income, One-Year Growth: -95.4%

Unlike rival investment banks on Wall Street, Mack has been able to keep Morgan Stanley independent, though as a government-supported bank holding company it is a far different animal from what it was just a few months ago. Credit losses have flattened the firm's profits and share price.

Candy Cane or Coal?: Coal

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7. Hugh Grant

Monsanto
2007 compensation: $11 million
YTD share performance: -33.66%
Net income, One-Year Growth: 103.8%

Under Grant, Monsanto has persuaded more and more farmers to plant its biotech crops designed to increase agricultural yield. Profits have more than doubled. The stock has fallen amid a slump in agricultural commodity prices but only after a breathtaking run-up in 2007 and early 2008.

Candy Cane or Coal?: Candy Cane

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Sears

8. W. Bruce Johnson

Sears Holdings
2007 compensation: $1.6 million
YTD share performance: -64.63%
Net income, One-Year Growth: -69%

Sears Holding Chairman Edward S. Lampert promoted W. Bruce Johnson to interim chief executive at the beginning of the fiscal year. Sales at the Kmart and Sears chains continue to fall faster than those at many rivals, with Sears total same-store sales off 9% last quarter. The company is shedding underperforming stores, and announced a $500 million stock-buyback plan.

Candy Cane or Coal?: Coal

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Campbell Soup

9. Douglas R. Conant

Campbell Soup
Annual compensation: $9.8 million
YTD share performance: -15.14%
Net income, One-Year Growth: 38.7%

Campbell, a classic defensive stock, has boosted profits despite the economic slowdown. Also, its share price has performed much better than the broader stock market and is also besting many rivals in the consumer staples sector.

Candy Cane or Coal?: Candy Cane

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Landov

10. John Strangfeld Jr.

Prudential Financial
2007 compensation: $10.1 million
YTD share performance: -79.46%
Net income, One-Year Growth: -64.8%

The Newark (N.J.) insurance giant has been missing earnings expectations and has been battered by several investment losses in the current crisis. Also, credit rating agency Fitch Ratings lowered Prudential's senior debt and insurance subsidiaries ratings on Dec. 2, out of concerns that the company will need additional capital next year.

Candy Cane or Coal?: Coal

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Abbott Laboratories

11. Miles D. White

Abbott Laboratories
2007 compensation: $33.3 million
YTD share performance: -7.44%
Net income, One-Year Growth: 136%

Abbott experienced strong third-quarter growth, with sales up 17.6% driven partly by demand for Humira, a drug to treat autoimmune disorders. The company recently approved a $5 billion share-buyback program, and White recently noted that all of Abbott's businesses were performing ahead of expectations.

Candy Cane or Coal?: Candy Cane

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12. Gregory Q. Brown

Motorola
Annual compensation: $6.1 million
YTD share performance: -73.38%
Net income: A loss of $487 million in the past 12 months, vs. positive net income of $474 million the previous year.

Chief executive since March 2007, Brown became co-CEO when Motorola tapped Sanjay K. Jha to share the chief executive post in August to help revive the flagging firm. On Dec. 2, Moody's Investors Service said it was considering downgrading Motorola's debt rating, citing the deteriorating performance of Motorola's handset division and other businesses.

Candy Cane or Coal?: Coal

Click here to see the full list.

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