208 InManagersWeTrust
If the early Ben & Jerry’s policy showed bad judgment, some of
the pay packages seen lately show something far worse. The CEO
of Networ kAssociates (owner of the McAfee computer antivirus pro-
grams), for example, got about $7 million in shares of McAfee.com
just ahead of its IPO even though the business of Networ kAssoci-
ates performed poorly and McAfee itself was losing money.^5
A key issue in the merger between Chrysler and Daimler-Benz
was the enormous difference between the two companies both in
the level of executive compensation and in the compensation ratios
of the highest-paid and lowest-paid employees. In 1997, for example,
Robert Eaton, Chrysler’s chairman of the board, received total com-
pensation of about $10 million, over 200 times the average worker’s
pay and nearly as much as the total compensation paid to all ten
members of Daimler-Benz’s management board combined. Daimler-
Benz’s chairman, Jurgen Schrempp, was paid about one-tenth as
much as Eaton, making his compensation approximately twenty
times that of the average Daimler-Benz worker.
Thus, a major question in the merger was the form that the
combined entity’s compensation structure should take. Schrempp
pointed out that the existing pay differences reflected cultural dif-
ferences, particularly the somewhat more egalitarian corporate cul-
ture in Germany, as demonstrated by labor representation on super-
visory boards. He also predicted that the U.S. model would prove to
be the proper form for DaimlerChrysler and other transnational
companies, except that “the only way to make big pay packets so-
cially acceptable is by linking them closely to performance.”^6
Schrempp’s statement mirrors the rhetoric of corporate America.
Given that the other differences in corporate governance between
Germany and the United States are more nuanced and subtle than
is generally understood, you have to wonder if this was Schrempp’s
main point when he said that DaimlerChrysler created “the first
German company with a North American culture.” Any doubt was
cleared up when Schrempp subsequently proselytized for American-
style executive options at DaimlerChrysler’s April 2000 shareholder
meeting, something his German shareholders sensibly resisted.
Stock Options
A decade ago corporate governance mavens urged boards to pay
managers more in stoc kthan in cash to promote an alignment of
interests between managers and shareholders. The response was tre-