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In addition, Nichols was part of the committee that created one of the first surveys that included U.S. executive compensation information. Nichols recalled that the survey was named “777” because the hotel room in Cleveland, Ohio, where the idea developed was 777.
“It was the biggest and most reputable survey in my day,” he said. “It was established by Bob Howe, and he would survey the top positions in a company, then the group jobs, then the division level, then the plant-level jobs. You could measure your company against another with the same sales volume. While this was OK at the top level, when you get down to the group level or plant level, the data become suspect.”
Nichols said at the time, CEO pay was typically based on the going rate. “From there,” he said, “the positioning of where you wanted your executive was more of an art than a science.” While Nichols was on the 777 survey committee, no executive in the United States was making more than $1 million. That all changed in the 1980s.
“The Internal Revenue Code had a marginal tax rate of 94 percent for any income over $150,000,” Nichols said. “That was pretty regressive. However, the tax rate on capital gains was only 20 percent.”
And in the 1980s, the tax rates under former President Ronald Reagan were around 30 percent, which opened the flood gates for what many have called “excessive” executive pay.
As a graduate in finance from Tufts University, Nichols began his career in 1961 working for CPC, where he quickly rose through the ranks of the finance department. After about 10 years, he was promoted to the manager of general accounting. CPC leaders saw his expertise with numbers and moved him to the position of compensation manager in the HR department. Thus began Nichols’ exciting career in executive compensation.
“There is a hard side, which is compensation, and a soft side, which is hiring and training,” Nichols said. “I was on the hard side.”
During his 21 years at CPC, he developed a reputation for his ability in executive compensation. At the same time, Nichols began a long, close association with the American Compensation Association. Nichols is not only a former board member and faculty member, but he was the CEO from 1995-1999.
In 1983, with his outstanding reputation and more than two decades of experience, Nichols was recruited by what was then a newly formed company developed from a merger between Dart and Kraft, which created the largest food company in the United States. Nichols’ first order of business was to review the board members’ compensation and set up a new compensation program for the corporate headquarters. With the full backing of company CEO Warren Batts, Nichols became the second corporate officer in executive compensation.
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