IBM’s Ginni Rometty – Beneficiary of Reverse Discrimination?

Ginny Rometty became IBM’s first female CEO in January, 2012. Since then, to lift a line from Forbes, it’s been “anything but smooth sailing.” Though the company’s stock price did slightly better in the first half of 2015, since becoming CEO Rometty presided over 11 consecutive quarters of declining revenues. Moreover, in 2014 IBM posed a shareholder return of negative 12.4%, and lower profits as well as lower revenues.

Still IBM’s board recently saw fit to boost her compensation 38.5 percent, to $19.3 million. In defending its decision the Board announced that the shortfall in IBM’s financial results were balanced against the “substantial strategic actions taken to balance the company.” Moreover, the board continued, Ms. Rometty’s increased package reflected its “strong confidence” in her “ongoing leadership.”

Ms. Rometty’s hike in pay is worth noting primarily because it is unusual these days to reward poor company performance. This is not to say that it never happens. It does. But the fact is that CEO pay is generally tied now to CEO performance. Chief executive officers do well when their shareholders do. According to the Wall Street Journal’s annual pay survey, “All 10 of the CEOs posting the best shareholder returns were paid more than they had been a year earlier, and all but two of the 10 worst performers got pay cuts.”*

So Rometty is clearly an outlier – her boost in pay in spite of IBM’s poor performance during most of her time at the helm is out of step with current corporate norms. The question is why. I have no reason to doubt the Board’s official statement: there are reasons for the nearly steady decline in IBM’s stock price and revenues; and the Board does continue to have confidence in Rometty’s “ongoing leadership.” But still I wonder if part of the explanation for Rometty’s significant raise in pay – up by over a third – in spite of her lackluster performance is reverse discrimination. To favor an individual – in this case the CEO of a computing giant who is female – who belongs to a group known to have been discriminated against previously is not exactly unheard of.

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* http://www.wsj.com/articles/how-much-the-best-and-worst-ceos-got-paid-1435104565

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