You rarely hear of anyone refusing to accept a couple million dollars with no strings attached. Yet the CEO of Plum Creek Timber Co., Rick Holley, recently did just that. He refused 44,000 restricted shares of stock his company had awarded him because he didn't believe he deserved it. He could have made a similar statement by liquidating the stock and then making a charitable contribution with the money to lower his tax burden and raise his profile as a decent guy. Instead, he did the honorable and selfless thing by simply refusing to accept it. In a regulatory filing, Holley wrote:
On December 12, 2014, Rick R. Holley, chief executive officer of the company, returned an award of 44,445 restricted stock units that were granted to him by the Compensation Committee of the Board of Directors . . . in light of prevailing economic conditions, Mr. Holley elected to return the restricted stock units because he does not believe that he should receive such an award unless Plum Creek's stockholders see an increase in their investment return. Nonetheless, Mr. Holley remains fully committed to Plum Creek and intends to lead the company through this challenging and prolonged economic cycle.
This refusal of nearly $2 million worth of stock is extraordinary, given the exorbitant compensation practices that have become commonplace in the executive suites of American business, It shows not only a moral compass but also a sense of accountability that has almost disappeared from the ranks of corporate leadership. Less and less are rewards for performance actually linked to the growth of a company. CEOs routinely expect outrageously lucrative packages simply to show up every day at work regardless of how well they actually do once they get to the office. It's a trend that has gotten more and more extreme over the past couple decades, and it serves as yet another symptom of the vexing wealth and opportunity gap at the heart of the American economy. American Banker recently summed it up:
In 2012, one American chief executive had a total compensation package of $96 million, while another, whose company had yet to make any money, earned $78 million. A third has a pension package of $159 million, which was recently reported by The Wall Street Journal to be "by far the largest pension on file for a current executive of a public company, and almost certainly the largest ever in corporate America." These kinds of figures are unfathomable to the average citizen.
Why exactly did Trolley refuse the stock? Because his company has been struggling, and he didn't believe he had done enough as a leader to get better results for his stakeholders. It seems to me he's taking a bullet for things he can't actually change (which makes his choice even more admirable.) Plum Creek Timber Co. provides lumber for the construction industry and new housing starts have been sluggish since the advent of the recession. Lumber production was nearly halved in the wake of the 2008 economic collapse, and is now at only about two-thirds the level it reached in 2005. Even so, according to Fortune, Plum Creek's stock hit an all-time high of $54 per share in 2013, but since then has slid to around $40. In other words, Trolley's performance as CEO over the past couple years didn't justify a reward, let alone such a large block of stock. Yet Fortune reported that his board of directors was "surprised" when he informed them of his decision. Holley said, "I appreciated their confidence in me, but I didn't feel comfortable taking (the stock)... This has been a year where total shareholder returns are down 10 percent or more. It just wasn't the right thing to do."
Doing the right thing. It sounds self-evident, yet it's a fundamental principle that has become obscured in business. Trolley simply listened to his own conscience, as all executives should. "Do the right thing" ought to be the first rule of doing business, the first principle taught in our MBA programs, as well as the primary and central imperative of any company's mission statement. Forbes lists Trolley's total compensation for 2013 at $8,161,257. In other words, he's not the kind of lavishly rewarded CEO that American Banker was decrying -- for some of them, $2 million in stock would have been the equivalent of a rounding error. The stock Trolley refused would have been worth nearly a quarter of his entire compensation in the previous year from Plum Creek Timber. Percentages like that would have given most people pause. Most would have found it extremely difficult to turn down stock whose value represented nearly a quarter of their annual compensation.
And yet he did, and his choice needs to be celebrated as the kind of thinking that can turn this economy around. He reacted with gratitude and good sense, not greed. It does my heart good to know we have people like Trolley setting an example for the rest of us.
Peter Georgescu is the author of The Constant Choice. He can be found at Good Reads.