Are CEOs worth what they are paid?
In today’s Oregonian PolitiFact.com tells us that a commonly seen ratio between what CEOs make and what the average worker takes home is outdated. The old number bandied about on bumperstickers is 431 to one.
That’s so 2004, says the column. The most recent number, from 2009, is a mere 264 to one.
Here’s a fact from the column that makes things a bit more clear: a Financial Times story from August has the S&P 500 chief executives last year receiving an average pay of $7.5 million, while the average private sector non-supervisory employee is pulling down just over $40,000.
If that looks like a chasm of unfairness, consider that it's “only” a ratio of 187.5 to one.
So how do CEO’s themselves look at these numbers? With guilt? Shame? Disregard? Pride? Superiority? A clear conscience?
One critic and expert on executive compensation said, in the words of PolitiFact, “What matters most to executives and those who set their pay is how they compare to their peers.”
Compare? How? In greed? (Question: What does it mean to have greed-driven executives running our corporations? How might their motives influence their decisions? Will those decisions be all about their short-term, personal wealth rather than, say, the welfare of their workers or the quality of their products or the long-term health of the company?)
I suggest that CEOs and pay consultants (paid, by the way, with checks signed by CEOs) might look at outlandish executive compensation in a few other ways.
• What does the gross inequity do to the morale of workers. Do the CEOs care?
• What does it do the financial health of their companies? Do they care?
• Are such CEOs actually “worth” that much more than the average worker? Do they believe they are?
• Would the CEOs be worse off, really, if they were paid, oh say, 10 times the rate of the average worker, or $400,000? Could they get by on that? If not, what are they doing running major corporations?
• Who is the board of directors, often cocooned and self-inflated CEOs themselves, to decide what is fair? How about letting the stockholders and the workers, decide?
• What do CEOs, or anyone else for that matter, really need (as opposed to want) in terms of compensation in today’s world?
That’s so 2004, says the column. The most recent number, from 2009, is a mere 264 to one.
Here’s a fact from the column that makes things a bit more clear: a Financial Times story from August has the S&P 500 chief executives last year receiving an average pay of $7.5 million, while the average private sector non-supervisory employee is pulling down just over $40,000.
If that looks like a chasm of unfairness, consider that it's “only” a ratio of 187.5 to one.
So how do CEO’s themselves look at these numbers? With guilt? Shame? Disregard? Pride? Superiority? A clear conscience?
One critic and expert on executive compensation said, in the words of PolitiFact, “What matters most to executives and those who set their pay is how they compare to their peers.”
Compare? How? In greed? (Question: What does it mean to have greed-driven executives running our corporations? How might their motives influence their decisions? Will those decisions be all about their short-term, personal wealth rather than, say, the welfare of their workers or the quality of their products or the long-term health of the company?)
I suggest that CEOs and pay consultants (paid, by the way, with checks signed by CEOs) might look at outlandish executive compensation in a few other ways.
• What does the gross inequity do to the morale of workers. Do the CEOs care?
• What does it do the financial health of their companies? Do they care?
• Are such CEOs actually “worth” that much more than the average worker? Do they believe they are?
• Would the CEOs be worse off, really, if they were paid, oh say, 10 times the rate of the average worker, or $400,000? Could they get by on that? If not, what are they doing running major corporations?
• Who is the board of directors, often cocooned and self-inflated CEOs themselves, to decide what is fair? How about letting the stockholders and the workers, decide?
• What do CEOs, or anyone else for that matter, really need (as opposed to want) in terms of compensation in today’s world?
Labels: boards of directors, CEO pay, compensation consultants, inequity
posted by Rick Seifert at
4:10 PM
6 Comments:
Talk about using a broad brush! You obviously feel that 'the CEOs' are overpaid, greedy slobs feasting on the remains of the 'lowly worker'.
Your entire argument is based on the false, unprovable premise that 'all CEOs are greedy and make too much money'. 'Too much' according to who? You? 'Could they get by on less' - well of course they COULD, but maybe they don't want to. Maybe they earned every dollar that are paid.
Even though I have little hope of getting through to you, let's look at an example. Let's say a person owns a chain of 20 restaurants - Subway, McDonalds, whatever you like. He takes home a profit of 1,000,000 per year. You mean to tell me that the guy who puts cheese on the bread or pulls the fries from the fryer has anywhere even remotely close to the same level of 'worth' to the company??
The 'CEO' took all the risk to start the business from scratch. He works 18 hour days 7 days a week for many, many years to build his business. He probably went to school for years, got an MBA, put off raising a family until later in life. He also probably failed at other business attempts along the way. So finally after many years, he becomes successful - he earns a nice living and can enjoy the 'finer' things (whatever that is, is up to him to decide!).
The burger flipper on the other hand - he comes to work at 8 and leaves at 5. He doesn't have to even give work a second thought. He has zero responsibility beyond his immediate tasks at work. He is paid according to his skill level.
A better question to ask is 'what is preventing the burger flipper from becoming the CEO?' Did he decide to have kids too early? Did he drop out of school? Is he just lazy? Broken home, single mother, drugged out, whatever - those are excuses. Look at our President - he overcame some of these difficulties.
The point is, in America you can be whatever you want. You want to flip burgers, go ahead. You want to start and run a business? Jump on it. You want to become CEO of a giant company? Give it a shot. If the 'morale of the workers' is low because they aren't succeeding in life like they want, the answer is easy - go back to school and get an education, then go after your dreams. The answer is not to say 'gee,look at what that guy has, let's cut him down to our level'.
"Socialism is a philosophy of failure, the creed of ignorance, and the gospel of envy, its inherent virtue is the equal sharing of misery."
Winston Churchill
Talk about using a broad brush! You obviously feel that 'the CEOs' are overpaid, greedy slobs feasting on the remains of the 'lowly worker'.
Your entire argument is based on the false, unprovable premise that 'all CEOs are greedy and make too much money'. 'Too much' according to who? You? 'Could they get by on less' - well of course they COULD, but maybe they don't want to. Maybe they earned every dollar that are paid.
Even though I have little hope of getting through to you, let's look at an example. Let's say a person owns a chain of 20 restaurants - Subway, McDonalds, whatever you like. He takes home a profit of 1,000,000 per year. You mean to tell me that the guy who puts cheese on the bread or pulls the fries from the fryer has anywhere even remotely close to the same level of 'worth' to the company??
The 'CEO' took all the risk to start the business from scratch. He works 18 hour days 7 days a week for many, many years to build his business. He probably went to school for years, got an MBA, put off raising a family until later in life. He also probably failed at other business attempts along the way. So finally after many years, he becomes successful - he earns a nice living and can enjoy the 'finer' things (whatever that is, is up to him to decide!).
The burger flipper on the other hand - he comes to work at 8 and leaves at 5. He doesn't have to even give work a second thought. He has zero responsibility beyond his immediate tasks at work. He is paid according to his skill level.
A better question to ask is 'what is preventing the burger flipper from becoming the CEO?' Did he decide to have kids too early? Did he drop out of school? Is he just lazy? Broken home, single mother, drugged out, whatever - those are excuses. Look at our President - he overcame some of these difficulties.
The point is, in America you can be whatever you want. You want to flip burgers, go ahead. You want to start and run a business? Jump on it. You want to become CEO of a giant company? Give it a shot. If the 'morale of the workers' is low because they aren't succeeding in life like they want, the answer is easy - go back to school and get an education, then go after your dreams.
"Socialism is a philosophy of failure, the creed of ignorance, and the gospel of envy, its inherent virtue is the equal sharing of misery."
Winston Churchill
A better question to ask is 'what is preventing the burger flipper from becoming the CEO?' Did he decide to have kids too early? Did he drop out of school? Is he just lazy? Broken home, single mother, drugged out, whatever - those are excuses. Look at our President - he overcame some of these difficulties.
The point is, in America you can be whatever you want. You want to flip burgers, go ahead. You want to start and run a business? Jump on it. You want to become CEO of a giant company? Give it a shot. If the 'morale of the workers' is low because they aren't succeeding in life like they want, the answer is easy - go back to school and get an education, take a risk, then go after your dreams.
"Socialism is a philosophy of failure, the creed of ignorance, and the gospel of envy, its inherent virtue is the equal sharing of misery."
Winston Churchill
There are a lot of assumptions here. How many CEO's take the risk to start a corporation, just for starters? How many of the CEOs of the Fortune 500 started their corporations?
What is the moral justification for exploiting "burger flippers"? Did the flippers have an equal opportunity to become CEOs?
"In America you can be whatever you want to be." WHATEVER you want to be? Callous? Cruel? Greedy? Isolated? Exploitative? Is that what America's all about? Whatever you want to be?
How about whatever you NEED to be (and do) for America to be a just society of truly equal opportunity?
Whether the CEO himself started the company or not makes little difference. I guarantee you they sacrificed mightily to get to that position in life - financially (to pay for the education required to hold that position), in terms of delaying decisions to start a family, spending time with that family while climbing the corporate ladder, and many other things. Additionally, they have the responsibility in many cases of the livelihood of thousands or tens of thousands of employees. They also have a responsibility to the stockholders - who aren't just fat-cat Wall St types by the way.
I don't see it as 'exploiting the burger flipper'. Why do you say he is exploited? I say he earns what his skill level supports. What stops him from doing something else?
When I was a kid (I'm 40 now) most of these jobs were done by teenagers. Got them spending money, showed them hard work, and in many cases motivated them to better themselves so they didn't have to do that job when they were adults.
You ask if the burger flipper has an equal opportunity to become CEO. I say in almost all circumstances, heck yes he does. The key here is 'opportunity' - that doesn't mean it will be as easy for one person as it is for another. Anyone who wants to can go to school in this country (even if not here legally!). How hard are they going to apply themselves? What courses are they going to take? What decisions and choices are they making with their lives (do they get into drugs/alcohol or have unplanned children?)....
You can serve your country for a few years and get a tremendous amount of help with a college education for example.
Yes, if you want to be callous, cruel, or greedy, you certainly have the right to be, within the law. There will be repercussions to that sort of behavior, economically, socially, and maybe even Biblically! Do I advocate those positions? Certainly not - I treat people as I wish to be treated. But I absolutely HATE the idea of someone else (you, the gov't, my neighbor) implying they know better than me what I 'need'.
It's unrealistic to think we'll ever get to the place where every single person is 'equal' in every aspect of life. People will always make decisions that lower their chances of success in life. BUT - we have a freedom in this country that allows you to have that chance at success if you really want it.
I applaud your passion, Anonymous. Question: I'm curious why don't you put your name on it and your firmly held beliefs?
What do you, by name, stand for?
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