CEOs under fire to perform – or else

CEO turnover set a record in 2006 and could reach another one this year as investors demand higher returns.

from the June 20, 2007 edition

Page 3 of 3

Page 1 | Page 2 | 3

And for all the burdens on their shoulders, CEOs are well paid.

"You can't have it both ways," Mr. Smith says. A high salary and lucrative stock-option plan "leads to high expectations on the part of the owners of the firm."

The private equity buyout trend has upped the ante for both CEO pay and performance. "On the whole, they're living a more comfortable life than they would if [the companies] were taken private," says Colin Blaydon, a private equity expert at the Tuck School of Business at Dartmouth College in Hanover, N.H.

But the rewards of success in private equity can be astronomical, he adds.

Private or public buyout offers often come at a premium of 20 percent or more above the current market value of public corporations. The News Corp. bid for Dow Jones is one prominent example.

Corporate directors, with an eye on these deals, are asking CEOs how they can boost shareholder value. "A lot of CEOs are getting those questions from the board and feeling the pressure," Mr. Blaydon says.

 

1 | 2 | Page 3