Between 2007 and 2008, the US stock market fell by 37 per cent and 2.6 million American jobs disappeared. Amid the economic chaos, the vast majority of companies performed far worse in 2008 than they did 2007 and many of their staff suffered the consequences.
Many, but not all. Because amid the chaos of the worst recession for the last 50 years, one group has remained immune from the pain.
According to a survey of 2,700 public companies by independent research firm the Corporate Library, median annual compensation for CEOs declined by a barely-perceptible 0.08 percent in 2008. Moreover, three quarters of the CEOs surveyed actually received an increase in their base salary.
When shares, options, pensions and deferred compensation are taken into account – so-called "total realized compensation"- the figures show a median fall of just 6.4%, with just 56 per cent of CEOs seeing a decline in realized compensation in 2008.
While this is the first fall recorded since the research was first carried out in 2002, set against the economic context it simply highlights just how far removed the notion of "performance related pay" is from reality.
As Paul Hodgson, the Corporate Library's senior research associate put it: "Paraphrasing the words of Mark Twain, rumours of the death of CEO pay have been greatly exaggerated. In fact, far from falling on its face - like the economy did - it has barely stumbled in its steady climb."
Hodgson added that while CEO's contracts would have been agreed before the financial crisis, one would still expect some elements of their remuneration packages, such as cash bonuses, to reflect performance.
Yet this link appears to be tenuous at best, or even completely non-existent. For example, the second highest-paid CEO in the survey, Oracle's Larry Ellison, took home $543 million on the back of a 21 per cent fall in the company's share price. (Highest paid of all, incidentally, was Steven A. Schwarzman of the Blackstone Group, whose efforts earned him an astounding $702 million.)
Number nine on the list of the 10 highest-paid CEOs is Michael Jeffries of giant clothing retailer Abercrombie & Fitch, dubbed by the Corporate Library the "highest paid worst performing" CEO.
While his base salary was "just" $1.5 million, judicious exercising of stock and option rights saw Jeffries' total compensation package reach $71.8 million – some $6 million of which was a "retention bonus" received despite the fact that he has been in the job for 17 years. The company also spent a further $1 million on his personal use of their corporate jet.
Meanwhile, the company fared less well. In fact $1,000 invested in the company at the beginning of 2008 would have been worth only around $300 at the end of the same year.
Compare this to Apple's Steve Jobs. He has taken home just $160 million over the past 10 years, during which time Apple's stock rose 860 per cent and some $150 billion has been added to the company's market value.
Given such gaping inconsistencies between pay and performance, it is not surprising that public trust in America's big corporations is at an all-time low – a fact that some sections of corporate America seem to be waking up to.
Last week, a report by The Conference Board, a research firm backed by some of the country's best-known companies, laid out a set of guiding principles for executive pay and called for companies to "take meaningful action to restore the trust that has been lost during the economic crisis."
Foremost among these is the establishment of a clear link between pay, strategy and performance. "A significant portion of pay should be incentive compensation, with payouts demonstrably tied to performance and paid only when performance can be reasonably assessed," the report said.
Firms should provide compensation that is fair, affordable and aligned clearly with performance, the report argued, and eliminate practices that conflict with the notions of fairness and pay for performance – namely golden parachutes, golden coffins et al.
Credible board oversight of executive compensation and transparency with respect to compensation practices were the final two principles The Conference Board encouraged companies to adopt – and already, AT&T, Cisco Systems and Hewlett-Packard have announced their backing for them.
"Shareholders of American companies and the public deserve to see executive compensation programs that serve shareholders' interests and are explained to shareholders in thoughtful dialogue," said Robert Denham and Rajiv Gupta, co-chairs of The Conference Board's task force on executive compensation.
But nagging doubts remains. Why should such glaringly obvious principles need to be restated at all? Why should companies feel they need to pat themselves on the back for adopting them? What about those that won't adopt them? And what does it say about the system of corporate governance and the principles on which companies are run that we ever got into this position in the first place?