Tuesday, January 14, 2014

CEO Salaries: Getting what you pay for?

In our consumerist society there’s a saying that you get what you pay for. The assumption is that the more you pay for something, the more quality you get. A corollary is “the more you pay, the more you get.”

Recently, as I was pondering what CEOs are paid, I found myself applying the saying “you get what you pay for” to other worldly executive pay packages.

The latest jaw-dropper brought to my attention is Stephen Hemsley, CEO of United Health Care, who in 2013 made a cool $106 million. But the CEO roll call of infamy is long – very long.

So is United Health Care getting what it’s paying for. Is it getting what it wants or needs? Are its customers and providers benefitting?

Here’s what United Health Care is getting: a dispirited work force, terrible PR and a self-centered, morally blind leader who seems to be (or is) driven by greed and egoism.

The argument goes that CEOs are paid what the executive salary market will bear and the salary market decides what they are “worth.” Leave the market to do its work, we are told.

Let’s assume this simplistic analysis is correct that the market is “fair” and that the system isn’t rigged by similarly high-priced “salary consultants” beholden to the people paying them.

So the “free” salary market rules.

Should it?

Not if we take into account other “markets” which ought to have a say in the “ruling.”

Pay attention boards of directors, stockholders (institutional and individual) and elected officials.

One “market” growing in importance is the “social justice market” also known as the “gross inequity” market. Others, as already suggested, are the public relations market and the “fair corporate culture market.”

There are others such as the “highest and best use” market. What is the highest and best use, for instance, of Mr. Hemsley’s $106 million?

Dare we suggest that it’s clearly not Mr. Hemsley?

Somehow these markets need to be welded together so that obscene CEO salaries will not, indeed, can not, happen.

Labels: , ,