At the end of 2001, the board of directors of Motorola Inc. did the almost unthinkable as far as executive pay is concerned: They cut it–or at least they voted not to come through with promised bonuses and stock awards for its top executive team. Thanks to the drubbing the company stock took when the telecommunications sector imploded, the directors no longer felt the compensation was merited. "It was painful [to do]," says B. Kenneth West, a Motorola board member and chairman of the National

Association of Corporate Directors, but "a properly constructed compensation program should reflect corporate performance on both a relative and absolute basis."

And after the carnage, Motorola was in fact a much smaller company. Its market capitalization had fallen from $44.4 billion at the end of 2000 to $33.9 billion in 2001; its revenues were down by 23%, and it had laid off thousands of workers. CEO Christopher Galvin can attest to that: He finished off the year making about $1.3 million–49% of what he took home the year before.

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