When Business Executives Are Rewarded For Failure

How many times have New York Times editorialists and columnists railed against companies that reward failed executives with golden parachutes in the form of bonuses and fat retirement packages? How many times have they grumbled that bank executives, in particular, haven’t gone to jail but rather have been lavishly rewarded, even though their banks have tumbled in value and shareholders have taken a bath? Too many to count.

Of course, it would be wrong to generalize about the treatment of outgoing executives. What constitutes an outrage when it is done on Wall Street may be entirely appropriate when we are talking about a CEO in another industry. Like publishing. Like the New York Times:

The New York Times Company today abruptly announced that its 61-year-old chief executive officer, Janet Robinson, will leave at the end of the year, with no permanent successor lined up.

An SEC filing says Ms. Robinson will get $4.5 million plus health insurance for a 12-month retirement and consulting agreement, including “two-year non-competition, non-solicitation and non-disparagement covenants, a three-year cooperation covenant and an indefinite confidentiality covenant.”

The Times itself reported that Ms. Robinson’s pay in 2009 was $4.9 million, so she’ll earn almost as much as a retired consultant as as a full-time CEO.

The handy investment calculator on the Times corporate Web site shows that $10,000 invested in NYT stock the day Ms. Robinson took over as CEO, on December 27, 2004, would be worth $1,855.14 today, a decline of 81.45%. The price of the stock went from $40.59 when she took over to $7.53 today, and though some dividends were paid out early in her tenure as CEO, the dividend has since been suspended.

So the Times is rewarding failure, lavishly. Well, to be fair, they are also buying a non-disparagement clause. Who knows what Ms. Robinson might have had to say about Pinch Sulzberger?

Just for fun, I compared the performance of the Times’ stock against some of the Wall Street banks that have been among the paper’s favorite whipping boys. The following numbers show common stock performance from December 2004 to the present:

Citigroup: -94.62%
Bank of America: -87.39%
New York Times: -81.45%
Morgan Stanley: -72.96%
Wells Fargo: -17.59
JP Morgan Chase: -17.12
Goldman Sachs: -11.67

An unbiased observer might wonder: why isn’t the CEO of the NY Times Company going to jail? Or why, in any event, is she leaving with a multi-million dollar payoff? If what happened on Wall Street was bad, why isn’t what happened in the newspaper industry worse?

Sure, the newspaper industry has faced extraordinary challenges, and no doubt Ms. Robinson did her best to deal with them. But how about the banking industry? Might there not have been some challenges there, too? Might bankers not have done their best to cope with conditions that few foresaw? What, exactly, makes the New York Times Company and its executives so special? Wouldn’t it be appropriate for the members of the Times editorial board and its columnists to learn a little humility, and not be so quick to denounce those who work–generally, far more successfully–in industries other than publishing?

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