Chief Executive Magazine, September 1997

"Real men don't have restricted stock; real men don't play games with options," opines leading critic of CEO pay Graef Crystal. "Last year CEO pay went up 16 percent on average, as it did the year before, while the average worker's pay increased by 3 percent. Keep it up and we'll have a revolution."

The response comes swift. "What does he know about real men?" exclaims Al Dunlap, chairman and CEO of Sunbeam Corp. "Stock options and restricted stock are the purest way to compensate executives. He ought to get a day job."

Dunlap is unapologetic about the $100 million he earned for his 18-month stint at Scott Paper, a company in intensive care when he arrived and in fighting shape when he left. having sold the company. "I was still the biggest bargain in corporate America," Dunlap writes in his book, Mean Business. "I created $6.5 billion in value; the shareholders made billions."

Upon closer examination, Crystal and Dunlap really aren't that far apart: Both strongly advocate pay for performance. But they happen to be on opposite ends of what so far has been a lopsided public relations battle over how to accomplish it.

In a world in which an ear-biting boxer earns $75 million for three days work in 1995, a daytime talk-show host (Oprah) pulls down nearly $100 million in 1996, and KISS, a band that hadn't set foot on stage or in a recording studio for 17 years, rakes in $27 million in 1996, public outrage over CEO pay seems misplaced. After all, CEOs are the stewards of America's economic engine, which produces paychecks for millions of people. In the words of Dunlap, "Why not focus on the brain-dead rock stars?"

Nell Minow, a leading corporate governance expert, answers, "Of the people who are in the upper stratosphere of pay--movie stars, roc stars, investment bankers, and CEOs--everyone except for CEOs are pay-for-performance people." Exempting Dunlap (who gets an "A" for his option-heavy compensation package) and other CEOs from this criticism, Minow supports independent boards and advocates having board members--rather than the CEO--recruit new members. She also recommends that board members own stock and that the board have executive sessions without the CEO and senior management in the room. "It's like a murder suspect," she explains. "You need a motive and an opportunity. The motive comes from stock and the opportunity comes from the meetings."

Minow's points seem to reflect the best thinking in the field, which is to get the process right, and let the results be what they may. "You can't look at specific amounts; you have to look at the bargaining process," says Charles M. Elson, a professor at Stetson University College of Law who specializes in corporate governance and serves on Sunbeams's board. "If the process is fair, then you have to accept the result."

Elson will get no arguments from Dunlap or Minow here. Dunlap calls such practices as repricing stock options on the way down "stealing," believes corporate directors should be paid solely in stock, and decries CEOs who rake in bonuses in years of poor company performance. Minow says her biggest dream as a shareholder is to invest in the company with the highest paid CEO in the world because he earned it.

All this points to the real problem with CEO salaries--the public relations nightmare. Two things are for certain. CEOs are going to continue to earn big bucks and an often ill-informed press will continue to write unflattering stories about it. Crystal predicts social unease--perhaps even a revolution--in a downturn. At the very least, he seed high marginal tax rates in the future.

What is needed is or CEOs to step up to the plate and defend their pay. "The problem is executives don't defend themselves," contends Dunlap. "Anytime you don't defend yourself you are going to get mugged." Perhaps it's time for top-performers to start bashing back.

'It's time for top-performing CEOs to step up to the plate and defend their pay.'