Have you heard of Hanlon’s Razor? It is very sensible, and goes like this: Never attribute to malice that which is adequately explained by stupidity. Hard to argue with, right? Hanlon’s Razor has been on my mind a lot lately as I continue to wade through the company proxies that have piled up on my desk. I think of it especially as I marvel at the seemingly infinite variety of ways companies have dreamt up to pay their top executives. Some of the ploys seem custom-designed to send the Evelyn Davises of the world into a full-blown lather. But for others, I just shake my head and wonder, what in the heck are these people thinking? Here’s an example: at one $10 billion retail institution (no names, sorry; I have to deal with these people), it is apparently the policy, as gesture of Yuletide goodwill, to pay to all employees a holiday bonus of $1,200 at Christmastime. I’m fine with that, and am sure the tellers, floor clerks, and other rank-and-file employees are pleased to get the extra money. Happy holidays! The CEO of this same bank was paid over $2 million last year. And yet-you saw this coming-he gets a $1,200 holiday bonus, too. At some comp level, executives should be expected to fund their own Christmas shopping, don’t you think?, and $2 million is surely well above that. What are these people thinking? Here’s another: the non-bank lender (which also shall not be named) that pays $11,000 and $7,000, respectively, to pick up the CEO’s and CFO’s annual parking tabs. Parking? Why parking exactly? Who comes up with this stuff? Then there’s the institution that that funds the “tuition expense paid to Mr. [let’s call him Smith] for the benefit of his dependent.” A family member’s tuition! Presumably the bank isn’t funding his beer money, too.
The list goes on and on. As I read these things, the temptation-I’m fighting it now-is to whip oneself into a frenzy of moral outrage about all the ways companies have found to nickel-and-dime their shareholders. And there certainly is a lot of that. But more likely (see Hanlon’s Razor, above) is that some of the people who participate in making compensation decisions at these companies are idiots. How else to explain why a CEO who makes $2 million a year gets a $1,200 Christmas bonus? It’s not venality it’s simple carelessness. The wonder is that the people who run these organizations-who are all bright, capable individuals-don’t stop and think for a moment, and then put a stop to the absurdity.Not all companies go in for this nonsense, of course. I know of one bank in the Midwest, for example, that doesn’t even expense employees’ meals when they travel. “I remind people it is not our money, it’s the shareholders,’” its CEO says. Good for him.But he’s in the distinct minority. There seems to be no end to what companies will pay for. Here’s one last one: the homebuilder who provides its top six employees an annual automobile allowance of $4,800 and then reimburses the cost of the gas they use. One hesitates to overly generalize on these matters, but I think it’s safe to say that the CEO of every public company in America can afford his own car and can pay for his gas money out of his own pocket. Dumb . . . . What do you think? Let me know!