Nice Work, if you can get it.

Former Harman International CEO Doug Pertz gets US$3.8 million to go away.

Reported in:

http://www.dealbreaker.com/2006/08/how_to_survive_on_4800000_per_1.html

http://www.footnoted.org/striking-the-wrong-chord/

Audio electronics marker Harman International (HAR) blew a speaker yesterday when it announced the resignation of CEO Doug Pertz. Pertz, who was just hired at the end of April, is leaving immediately, marking an abrupt end to his brief tenure. As Forbes noted, however, it wasn’t exactly perfect harmony from the beginning, given Pertz’s lack of relevant industry experience. Pertz, however, is singing a sweet tune.

How come? In the 8-K Harman filed late yesterday to announce the CEO change, it noted that Pertz is walking away with a severance payment of $3.8 million. That works out to about $48,000 a day for Pertz’s four months of work! The musical chairs certainly didn’t sit well with shareholders, who now have to bear the cost of signing yet another CEO. After all, compensation consultants aren’t cheap. Ditto for executive search firms. Investors responded to the resignation by pushing the stock down 4% yesterday, erasing all of the week’s gains.

Stories like this remind me of the Dilbert cartoon where the pointy-haired boss exclaims, “Tell me again what we manufacture? Never mind, it’s irrelevant, a great manager can manage anything.” (Or something to that effect)

Maybe I’m unduly opinionated on the subject of executive compensation because of all my years in commission sales. In my world, if you can’t hunt or farm (or both), you don’t eat. So from my perspective, unless they’re growing key metrics that deliver profit, I don’t know why senior execs feel they deserve seven-figure compensation. Rewarding failure seems like such a misguided approach to doing business. Many companies in manufacturing or retail industries would do well to look at the compensation model of the insurance and financial services industry: senior management gets a fair six-figure salary, but the real money comes at bonus time. If you did a great job, seven and eight-figure bonus cheques are how the firm says, “thank you.” If you didn’t do a great job, you’re probably out on the street.

Sphere: Related Content