Last year, I wrote a post noting that homebuilder CEOs had received huge compensation packages in 2005. I argued that such compensation was a result of a booming industry resulting from macro factors beyond the CEO's control, and not individual performance, and this signified problems with the way executive compensation is structured. I mentioned Lennar, Toll, KB Homes, and Hovnanian as examples.
During the boom times, apologists claimed that the homebuilders had learned their lessons from past bad experiences, and that their CEOs were skilfully navigating their companies to avoid the typical boom and bust cycle by limiting land holdings and other measures. Hmm. As this chart shows, Lennar, KB, and Toll shares have all declined more than 50% in the last two years. Hovnanian--whose CEO received almost fifty million dollars in '05--is down 80%. Of the four, the best performing company (at least as judged by share price) has been Lennar, whose CEO received the least in '05--a measly 22 million, compared to the 135 million received by KB's CEO. Somehow, I don't think any of the CEOs--some of whom sold massive amounts of their personal holdings while using shareholder money for buybacks--are going to be returning to shareholders any of their undeserved bounties.