CEO Compensation: Chasing the ‘Welch Rabbit’

Timothy R. Wing

CPA Journal Editor-in-Chief Mary-Jo Kranacher wrote an excellent column on a difficult subject in her May 2013 editorial, “CEO Compensation Controversy: A Corporate Governance Failure.” Having served as director of a Big Four firm's review service for Statement of Financial Accounting Standards (SFAS) 123, Accounting for Stock-Based Compensation, I assisted GE with valuation calculations with regard to Jack Welch's retirement package. I agree in general with Kranacher's assertions about excessive executive compensation, but the $417 million figure that she referenced is, in my opinion, overvalued by approximately 100%, due to the flawed valuation protocol of SFAS 123 (now Accounting Standards Codification (ASC) Topic 718, “Accounting for Stock Compensation”)—and perhaps also due to the exuberance of the former Mrs. Welch's (Jane Beasley) divorce counsel.