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PolitiFact.com tells us that a commonly seen ratio between what CEOs make and what the average worker takes home is outdated.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
