Dynamist Blog

Like NFL Coaches, Without the Glory

In Saturday's NYT business section, Claudia Deutsch had an even-toned, solidly reported article on why new CEOs demand, and get, so much money and such generous "prenups" in case they're fired.

"Two years ago, people might have accepted the C.E.O. job with a one-page term sheet," said Thomas J. Neff, chairman of United States operations at the recruiter Spencer Stuart & Associates. "Today, depending on the lawyer, the contracts can be 30 pages long."

In the end, lawyers and management experts say, executives are still getting what they want. "The process has become grueling, with everyone fretting over every provision and every clause, but the result is pretty much the same," said Robert J. Stucker, chairman of the Chicago law firm of Vedder Price.

The reason the directors are still granting sweet deals rests, quite simply, with the law of supply and demand. The corporate seat of power is not only getting hotter, but is increasingly equipped with an ejector button that directors are ever quicker to press. In fact, turnover in the corner office is heading toward a record high this year....

That means the supply of untainted superstar executives--or "gold medal winners," as Mr. Stucker calls them--is dwindling.

And private equity firms often get first crack at those who are left....

"Private equity is sucking up a huge amount of top management talent, because they offer the opportunity to make a bundle without reporting to a board," said Gerard R. Roche, senior chairman of Heidrick & Struggles.

Now if only Gretchen Morgenstern would stop crusading against CEO pay long enough to do similar reporting--or at least read her colleague's work.

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