Is Cisco CEO John Chambers overpaid? After Cisco's challenging fiscal 2011, which saw the elimination of 12,000 jobs and much of its consumer business, and a 30% drop in its stock, Chambers' salary was reduced by 2% and his stock compensation by one-third.
Despite the correction in Chamber's compensation, he was still named the most overpaid CEO in America by 24/7 Wall Street. And he was the only IT CEO to make the dubious list - others on it came from defense contractors, pharmaceutical companies, oil and gas, and money management firms.
The 24/7 Wall Street list compares a company's stock performance to a CEO's overall compensation. So Chambers isn't necessarily the highest paid executive on list - just that he was compensated richly for a company that lost over 30% of its value at the end of Cisco's 2011 fiscal year, as Chris Nerney of IT World points out.
In naming Chambers as the most overpaid CEO, the editors of 24/7 Wall Street note that Cisco was once considered the most well-run company in Silicon Valley. Yet that unraveled along with the company's strategy of entering 30 or so market adjacencies to meet ambitious growth targets.
One of those market adjacenies was consumer electronics, which turned disastrous for Cisco. The company killed it Flip pocket camcorder business after buying Flip's creator, Pure Digital, for $590 million (Pure Digital's CEO left Cisco to make grilled cheese sandwiches).
Meanwhile, margins in consumer and other adjacent businesses could not match those of Cisco's routing and switching sales, and even switching margins got hit by a nettlesome product transition in that business.
As a result, Cisco is restructuring and refocusing on its core markets of routing and switching, as well as others that are more directly tied to those high-margin core businesses. Cisco has also lowered its annual growth targets to more realistic and less ambitious goals.
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