Self-justification, CEO style

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Becoming chief executive of a major corporation is like getting a slot machine that always pays off. The money game is definitely rigged in your favor.

In the early '90s, when CEOs were embarrassed by headlines that exposed the garish level of the paychecks they were hauling away, they launched a highly publicized "reform" movement. The movement's goal was not to bring executive pay down to earth, of course, but to "rationalize" their pay by linking its level to "performance." Who could argue that "pay for performance" wasn't fair? Few did ... and we were hooted down as populist spoilsports.

Well, now the game is up. Graef Crystal, the nation's leading analyst of corporate pay, has done a study for the New York Times that confirms what a few of us "spoilsports" were saying years ago: CEOs maneuver behind the closed boardroom doors to keep their paychecks artificially high, no matter how the companies perform.

Among the tricks is the use of outside compensation consultants to set the bosses' pay. Sounds good, but guess who hires the consultants? Bingo if you said the bosses! If the CEO doesn't like the consultant's report, he or she can fire that so-and-so and hire another one who'll produce a number that's music to the CEO's ears.

Another trick is the "compensation committee" of the corporate board of directors, set up to review the chief's pay package. Once again, though, many of the chiefs themselves get to name their own review committee.

For example, Alfred Lerner, CEO of credit-card giant MBNA, now is paid $48 million a year. He has wallowed in annual pay hikes of about 150 percent the last few years -- far outstripping his company's performance. This is no surprise at all, since the chair of Lerner's compensation committee is a lawyer whose firm does work for MBNA ... and who, for an added bonus, was Lerner's roommate in college.

No wonder our credit card rates are so high!

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