Runaway executive compensation has been an issue with shareholders for years
at many American companies, and finally a CEO has bowed to the pressure and
tied his pay solely to company performance – but not without a little
The boss at E*Trade Financial Inc.
, Chairman and CEO
Christos M. Cotsakos, is actually giving back a $21 million chunk of last
Of course, the company’s news release on the matter followed the publication
of a Wall Street Journal story on Cotsakos saying that he is “the
executive in the brokerage business, with a pay package valued at about $80
The story quoted one pay consultant as saying the compensation package
“appeared to be a runaway gravy train.”
E*Trade apparently got the message.
The Menlo Park, Calif.-based company said that Cotsakos now has signed a
two-year contract that includes zero base salary and an annual bonus based
exclusively on company performance.
And he is returning $6 million previously contributed on his behalf to the
Supplemental Executive Retirement Plan. He also agreed to return two million
shares of company stock from a prior grant. And lastly Cotsakos agreed to
what the company called a “significant reduction of severance pay in the
event of a termination either following a change in control or outside a
change in control.”
Shareholders had complained that Cotsakos’ pay package was outlandish, even
by today’s standards. The CEO of Goldman, Sachs, by comparison, made about
$19 million in 2001, Reuters said, a year when the company earned $2.31
billion. E*Trade last year lost $241.5 million.
The Journal story said that the online trading and discount brokerage firm
also pays for security systems for Cotsakos’ house and plane as well as his
tuition and flights to London to finish a Ph.D. from a university there. The
company is facing at least one shareholder lawsuit over the boss’s
“I have listened to shareowner concerns and want to dispel any doubt that my
commitment to the success of this company is unwavering,” said Cotsakos in a
statement. “I am eager to eliminate the distraction of the compensation
discussion so that we can focus on the business of E*Trade Financial.”
Whether they are shareholder concerns (the stock is trading at about $6 a
share) or concerns about bad publicity, the news will surely please the
AFL-CIO, which says that two big trends distinguished CEO
pay in 2001: “first, a dangerous and ongoing disconnect between performance
and pay, and second, stark double standards on retirement security and job
security for CEOs compared with workers.”
The flagging economy and poor corporate performance — including falling
stock prices, declining profits and big layoffs — have barely made a dent in
executive pay, the AFL-CIO said.
Meanwhile, if you want to check on how much the boss is making at your
company, check out the nifty search function for public companies at ecomponline.com/.