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.

Getting by on $100,000

Prepare yourselves. I’m about to propose something un-American, anti-free market, and anti-individualistic.

You have now been warned and, I hope, immunized. You will not react to the following by saying “Why that’s utterly un-American! etc.”

Ready? Here we go....

In America, starting now, no person will be compensated more than $100,000 a year.

That’s enough, already.

With that lid comes universal health care, no income taxes (with one exception—see below), an adequate pension, the best schools in the world and guaranteed food and decent housing for all. There will be so little crime, the nation will be down to two or three prisons.

We might even see such a shift in values that we will disband our military, saving trillions of dollars and thousands of lives.

Starting today, your financial compensation and your perceived or proclaimed “worth” are separate concepts. You aren’t paid what you have been told you were “worth.” Your worth yesterday was what some kept “compensation” firm or over-paid board of directors told you that you were “worth.”

Today, your pay can not exceed $100,000. If, like many well-to-do, you get your kicks by being told that you are “worth” millions more than the next executive or hedge fund manager, you can still be told that. You just won’t be paid it.

To assuage your ego, I suggest a badging system like medals pinned on generals’ uniforms.

“My company has put my ‘worth’ at $50 million,” you can brag, pointing to your $50 million badge. Of course, you’ll look like a fool, but that’s your choice.

But, just to be clear, that so-called displayed “worth” is $49,900,000 more than your are actually paid, and everyone knows it.

In fact you are paid exactly what someone who is really “worth” $100,000 is paid.

Isn’t that unfair?

Not really, because the current “compensation” game is rigged and the executive market is grossly and dangerously inflated.

I contend that if you feel it is really important that you be paid 300 times what a line worker in your company is paid, or 3000 times what some off-shore worker is being paid by your company, you aren’t even “worth” $100,000. In fact, you might be worthless. A liability. The door is over there.

Some might even suggest that you morally bankrupt. I’ve even hear it said that you are insane. Delusional. Sociopathic.

So what happens to the difference between your alleged “worth” and your real compensation? That $49,900,000.

See those benefits above? The excess pays for them — for you and literally thousands of others. That’s right, thousands. Do the math.

“But I can’t get by on $100,000 a year,” you complain.

“Try it. You’ll like it.”

Say what?

Yes, you’ll live simply (and discover how much you don’t need), stop destroying the environment through overconsumption, be contributing to a more prosperous, equitable society, be helping thousands less fortunate than you (most will be making considerably less than $100,000 annually) and you and your corporation will no longer have a reason to rig the political system and make a sham of democracy.

You will also recognize just how important public services, equality and fairness are to you, your fellow executives and everyone else.

You owe that $50 million “worth” of yours to the nation’s infrastructure (now crumbling), its schools (now in crisis) and thousands of public workers (now having their rights taken from them) who keep the nation humming along so your company can afford your bloated “worth.”

Well, won’t this all contribute to a massive brain drain to other countries? Not if you keep your American citizenship. You may be paid abroad, but a “foreign earnings”
 tax kicks in. It claims everything over $100,000. Sorry.

If you can’t live with that, leave.

Won’t there be unintended consequences? Like empty mansions, plummeting Mercedes sales, and uneaten caviar. Absolutely.

It’s all part of living simply and fairly. It will mean getting rid of status symbols and discovering that life’s real gifts are available to all, even you.

Trust me, with time, you’ll get your values straight. You will even come to appreciate your own true value — as a human being.

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?

Northwest CEOs get richer

This just in: It's tough when you are only making a few million a year. That's why you need that double-digit percentage pay raise.

Meanwhile, as chief executive, you flat-line the pay of your work force — the folks who make it happen for you.

Makes all kinds of sense. Right?