According to Bloomberg News, compensation for CEOs in companies listed in Standard & Poor's 500 fell 46% during 2002. To an average of $4.4 million. Maybe that's why they call it Standard and Poor's.The pay cuts were exemplified by Eli Lilly's Sidney Laurel, who earned a salary of $1 last year and got no bonus, a pay cut of $1,865,365, according to Bloomberg. Sounds horrible, doesn't it? Lest you spill too many tears for Laurel, rest assured that's not the whole story. The compensation figures ... don't include items such as restricted stock, unexercised options, retirement pay, and perquisites ranging from life insurance to travel on the corporate jet. Then came this incredible statement:"Options are substantially underwater, said Michael J. Cook, former chief executive of accounting firm Deloitte & Touche LLP, who now sits on compensation committees at Dow Chemical Co. and HCA Inc. "The question we are starting to hear is 'Are we at risk of losing people we thought we had compensated well but have in fact not been able to put that much in their pockets?'" Execs may not have put compensation in their pockets but they put it somewhere. Ask Qualcomm's Irwin Jacobs, who "pocketed" options worth $61.4 million last year. Or Citigroup's notorious Sanford Weill, who got no bonus but exercised options worth $11.8 million, according to Bloomberg. And on, and on.That a compensation committee member can make a statement such as Cook's with a straight face tells you all you need to know about how the flawed compensation system works.
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