Corporate Treasury as Founder's Piggybank

Measuring what’s due at Polo Ralph Lauren …, Michelle Leder footnoted* post for today asks an interesting question, “when a company is still headed by its founder, and where that founder still holds a significant chunk of the shares, are giant paychecks more tolerable, short of outright exploitation?” Ralph Lauren is chairman and chief executive. He controls 76.1% of the voting shares.

The top five executives raked in an amount equivalent to nearly 13% of of the profits the company reported for the fiscal year just ended: some $61.4 million, vs. $479.5 million net income. To put it another way, that’s more than the company’s profits for all of the March quarter of 2009. Lauren himself raked in $27.7 million, all but $7 million or so in cash, and including $558,376 in “reimbursement for personal travel.”

Company performance isn’t bad — the share price is up and has beat the S&P 500 handily over the last 12 months. Revenue fell slightly last year, but operating income and net income are up strongly. Of course, holding so many shares, Lauren benefits from those metrics at least as much as other stockholders do. But we always hear that good managers aren’t all that easy to come by.

Should the top 5 execs be limited to some proportion of the profits? Do we /should we have different standards for founders? When one individual holds such a high proportion of the stock and other shareowners essentially have no control, it seems you would need an abundance of trust to invest in the company. Perhaps even an overabundance of trust. Me, I don’t even know the guy, so I don’t own the stock but maybe I’m missing out?

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