The board of directors of Xerox Corp. (NYSE: XRX) gave Chairman and Chief Executive Officer Ursula M. Burns a pay package worth $13,070,245 for her 2012 performance. The figure would be good by the measure of most public company CEOs. In the case of Burns, the compensation came in exchange for a performance that was mediocre at best.
Last year, Xerox’s revenue fell 1% to $22.4 billion. Net income dropped 8% to $1.2 billion. Results for the fourth quarter were slightly worse. Revenue fell 1% to $5.9 billion. Net income was down 10% to $343 million.
The Xerox board offered its broad philosophy about how management should be paid, based on several “core principles.” According to the Xerox 10-K:
These principles are intended to motivate the named executive officers to improve the Company’s financial performance; to be personally accountable for the performance of the business units, divisions, or functions for which they are responsible; and to collectively make decisions about the Company’s business that will deliver value to shareholders over the long term.
How those principles could be applied to excuse the more than $13 million Burns made is beyond explanation or comprehension. Xerox’s financial “performance” was poor. The board has done nothing for shareholders with this package except sell them short.
Rich executive compensation has gotten a bad name over the years. The primary reason for the criticism is that CEOs are not paid for their performance. Rather, their packages are based on boards that favor the CEO’s benefits over those of shareholders.
Burn’s most recent sop to shareholders, as she described Xerox’s performance in the final quarter of 2012, was this:
“Strong growth in services and the consistent profitability of our document technology business generated significant operating cash flow and contributed to fourth-quarter earnings that met our expectations.”
Based on the company’s actual performance, those expectations are not acceptable, at least not for someone who is paid $13,070,245.