Least complimentary mention of an Eph in yesterday’s New York Times? This:

Robert L. Nardelli’s unceremonious departure from Home Depot may spell the end of the era of super-size pay packages for chief executives of public companies, but a new refuge for lavish compensation and private jets is emerging elsewhere. Flush with hundreds of billions of dollars, private equity firms are beginning to offer compensation on a previously unimaginable scale to the chief executives who run the once-public companies that the firms have bought out. At the privately held firms, the executives still get salaries and bonuses, but a crucial difference lies in the ownership positions they can secure, which can turn into particularly bountiful riches when these businesses are sold or go public again. … Henry Silverman, who spent the last decade building Cendant into an $18 billion conglomerate — it owned dozens of the nation’s most prominent businesses like Century 21, Avis, Days Inn and Orbitz — through a number of stock deals, says being public is no longer attractive. He broke up Cendant into four pieces and last month sold Realogy, its former real estate unit, to Apollo Management, a private equity firm. “There is no reason to be a public company anymore,” he said. “You don’t need access to the public market,” because, he said, of the enormous amount of money sloshing around private equity and hedge funds. Like Mr. Nardelli, Mr. Silverman of Cendant had been accused of being an imperial chief executive with an outsized pay package. He is estimated to have made $36.6 million in salary and bonus and reaped $223 million from exercising options between 1998 and 2002. And he will make $135 million more as a result of selling Realogy. “Wherever I show up next, it will not be at a public company,” Mr. Silverman said.

There are not many public company shareholders who will miss the “services” of CEOs like Silverman ’61. Consider


An ordinary investor might think that a CEO who made $18.6 million last year (that’s just salary and bonus and doesn’t include a bunch of other compensation) might feel a little sheepish about having to hit up investors to also cover the expense of negotating his employment contract, particularly when the amount exceeds the salary of a first year associate at a top New York law firm. Unfortunately, that investor would be wrong. Cendant (CD) Chairman and CEO Henry Silverman, who has been described in the past as a “pay pig” by New York Times reporter Alex Berenson had no qualms in getting Cendant to reimburse $165K worth of legal expenses in 2004, according to the company’s recent proxy. That’s on top of the $203K in legal expenses he rang up in 2002, also for contract negotiations. Both figures also include tax gross-up payments for the legal bills, so it’s hard to figure out exactly how many hours Silverman’s legal eagles labored away negotiating his contract. Doing some quick back-of-the-envelope math of 100 hours times $500 an hour (which seems awfully excessive for an employment contract), it still only works out to $50K. While it’s true that many companies reimburse their executives for this expense, it’s very rare that these expense exceed $25K and it’s usually not an every-other-year event.

“Pay pig” is not something that I hope to see on my tombstone. More details here. Is Silverman ’61 a big Williams donor? Tough to know, but I can’t find a single mention on the Williams website. Perhaps he just prefers anonymity? My guess is that he is not a big donor and that the College spends a non-trivial amount of time trying to fix this sad state of affairs. Good luck with that! By the way, the whole article is mostly bunk. Every time the finance folks who control these deals give some hired CEO a big payment, that money comes out of their pockets, dollar-for-dollar. If Home Depot had been a private company during the the Nardelli era, there is no way he would have earned hundreds of millions of dollars. Private company CEOs will, on average, get paid a lot less (and shoulder more risks) than public company CEOs. And, don’t forget my master plan to lower CEO pay at public companies. Congressman Barney Frank is working on similar legislation, but it needs to provide a fixed dollar figure for shareholders to vote on. Someone tell Congressman Chris Murphy ’96!

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