ROE v. Paid: No Tears in Telecom's Boardrooms

The sector returns next to nothing on equity, while its CEOs do as well as anyone.
By Stephen Schurr ,

Investors haven't exactly gotten rich investing in telecommunications-services companies in 2002, but the sector's chief executives have made out quite nicely.

Of the 12 telecom stocks in the

S&P 500

, only

Nextel

(NXTL)

ended 2002 in positive territory. According to the

ROE v. Paid Telecom

chart, an even six notched five-year average return on equity above 15% -- the unofficial bar set for solid ROE performance. Nonetheless, six telecom CEOs raked in eight-figure salaries in 2002, according to figures provided by compensation-tracker

eComponline.com -- including a few with negative ROEs.

Whose pay is difficult to swallow?

AT&T

(T) - Get Report

hasn't exactly shot the lights out from a return on equity basis -- the telecom giant posted an ROE of negative 40.89% in 2002 and its five-year average is 1.1%. Chief Executive and Chairman Dave Dorman pulled in $12.9 million last year, but it's hard to pin the company's poor use of capital on him, since he only assumed the top slot last year.

What the

ROE v. Paid

list doesn't show is that former CEO C. Michael Armstrong brought in $18.4 million in compensation in 2002. While the fat payouts at AT&T can be partly explained by the "size matters" principle in corporate compensation -- generally, the bigger payouts tend to occur at the bigger companies -- it's still a hefty two-person take, especially by the standards of long-suffering AT&T shareholders.

The

ROE v. Paid

chart below measures the average return on equity over the past five years for each of the 12 telecom companies in the S&P 500. ROE is a handy measure of how effectively a CEO puts shareholder money to use. For the chart, we set the bar for solid performance at 15% average ROE over the past five years -- an imperfect gauge because of apples-to-oranges comparison across some sectors and occasional one-year flukes that throw off a company's five-year average. Nonetheless, readers can compare ROEs within subsectors to get a better sense of how a company stacks up.

As a comparison, the chart also lists how much the company's chief made in pay, bonus and options last year (or the most recent year available), according to compensation-tracker eComponline, to let readers decide whether the chieftains earned their keep.

Want to know how the rest of the telco CEOs measured up in 2002?

Check out the list.

Click here to see entire table.

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