BOTTOM DOLLARS

The gap between the average CEO's salary and everyone else's has become such a chasm that the media can't help gazing regularly over the edge. When SEC documents reported that $2.3 million in retention bonuses were awarded to top executives of bankrupt CLEC Allegiance Telecom, a Dallas Morning News article tacitly posed the question: Is it wrong for execs to take half-million-dollar bonuses when the company can't afford to pay its own lenders? In this case, the answer is probably not. Allegiance needed more than $700 million to meet its bank covenants; $2.3 million would not have helped much. The company's best chance for avoiding bankruptcy was with its top executives as they tried to renegotiate with banks. If the CEO and CFO had resigned, as some other executives already had, Allegiance would be hamstrung and would now be in far worse shape for recovery. These men have grown revenue consistently in an impossible climate, repeatedly buying company stock as the price went down. In addition, the bonuses in question were partly tied to performance — CFO Tom Lord's $500,000 bonus is divided into six payments, four of which are contingent upon meeting restructuring goals. And the awards were performance-based in another way, too: If top executives had avoided bankruptcy, their bonuses would have been secure. Now they're in the hands of a bankruptcy judge, who may decide for himself if they're well deserved. CEO compensation is an issue that deserves more scrutiny and debate as examples of outrageous fortune abound. This isn't one of them.