Executive pay in the plastics industry is a mixed picture. On the one hand, you have some egregious examples of a system run amok, such as Foamex's chairman getting a $750,000 bonus when the stock return is down 61 percent for the year.
The company is a nightmare of corporate governance - its board is padded with directors who have lucrative outside consulting contracts with the company, opening up the firm to questions from shareholders about whether its board is capable of acting independently from management.
On the other hand, there are positive examples. PolyOne's chairman, CEO and president, Tom Waltermire, voluntarily cut his own pay 10 percent this year, and he took a smaller bonus than he was allowed last year, in view of the company's struggling performance and the difficult economy.
Investors were not shy about publicly voicing their concerns: Magna International Inc. Chairman Frank Stronach got in hot water over his pay package, which includes a $31.5 million payment to a consulting firm with which Stronach is affiliated. A large pension fund controlled by the Ontario, Canada, teachers unions voted against Magna's board in protest.
Another example: Royal Group Technologies cut bonuses to Chief Executive Officer Vic De Zen and President Douglas Dunsmuir after investors wondered why executive bonuses went up while performance faltered.
Royal also adopted a new way to calculate bonuses, using return on capital instead of earnings, a move that the dissident investors praised. Other companies faced similar questions.
A large investor at Lamson & Sessions expressed concern about executive pay and urged that company to figure bonuses based on return on capital, not earnings, after Chairman John Schulze's pay went up 51 percent and shareholder return fell 39 percent.
The company, however, defended using earnings as a measuring stick because of the firm's debt load and the need to manage its earnings carefully.
To quote one observer of industry executive pay: ``Shareholders can be an ugly bunch when things are down.''
Fair point. Most shareholders probably would not be complaining as loudly or at all if all the companies in question were producing good returns.
But corporate governance types say that good governance can reap benefits on its own, and there's some evidence to support that. A study claimed the companies that the California Public Employees Retirement System focused on, by asking for boardroom and compensation reforms, showed marked improvement.
Clearly, many companies argue they have solid executive pay systems, and in fairness, some surely do.
But you can't help reading proxies and getting a little cynical. This year, for example, several of the giants of the plastics processing industry all reported that they had hired consultants to look at their pay, and concluded that executive compensation was too low.
Of course companies need to be competitive with pay at all levels. But it's rare to see a company report in its proxy that consultants found its pay to be too high. When they all look at each other for comparison, and all it takes is a few to continually up the ante, it's small wonder that there's more pressure to boost pay.