The economy is back in full swing if you’re a CEO that is. According to a NY Times report, the average CEO pay rose in 2010, which was not surprising since companies are finally regaining financial footing. What surprised the Times was the amount by which executive compensation rose. According to their information, the “median pay for top executives at 200 big companies last year was $10.8 million. That works out to a 23 percent gain from 2009.” Yes, a 23% increase. How are you doing with your 1%?
The main reason for the rise in executive pay was good old cash. Cash bonuses rose by a whopping 38 percent. Be still my soul. For me to get a nearly 40% raise I would have to die and be reincarnated as someone else. I don’t think that my compensation will rise by 40% for my entire lifetime. Topping the list is Philippe P. Dauman, the chief executive of Viacom, who received a total compensation of $84.5M. That’s for ONE year. That’s not for decades of work. It’s ONE year. That’s him below if you single ladies (and some of you gentlemen) want to slither up to him in a bar somewhere. Make that supper club.
The Time believes that this incredible jump is pay is to “make up” for the year before when executive compensation was “lean”. My kind of lean and their kind of lean are two totally different kinds of lean. Maybe they had to downgrade from caviar to ikura last year but this year they are buying the entire fish. Consider this: the average American worker took home $752 a week in pay, up 0.5 percent from a year earlier, but that tiny gain was wiped out by inflation. This means that you effectively brought home LESS or your pay could buy LESS than before. What does the average worker do when executives that were already taking home almost 300 times more than the lowest paid worker in the company then gets a 23% raise and they’re left with a raise of one half of one percent?
Now, don’t think that I am against executives receiving a large compensation. Since they are entrusted by shareholders to lead the company to financial success, it is only fair that the most senior executives should receive a compensation package commiserate with the performance of the company, but that’s not what we’re talking about here. Boards are still struggling with how to tie executive compensation with the company’s performance. It does make since that if an executive can be credited with making the company profitable, they should also be blamed and adequately compensated for lackluster performance.
The NY Times has a great infographic on executive compensation. You can see a small version of it below. Click to enlarge and view it on the NY Times website.
<font=1>This article and others can be found at Yes, I Am Cheap where Sandy chronicles her efforts at getting out of debt.
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That is why I am trying to become a CEO!
Is it the old supply and demand axiom? There are only so many people who can lead a company and therefore we must pay them over the top compensation. That would make sense if it were true. There are many successful leaders of companies who are not compensated as well because they own private companies. Their companies are considerably smaller than these public companies. The shareholders pay this compensation, maybe they should have a say regarding compensation.
I don’t know why shareholders drag their feet with this. Do you remember the compensation for Dick Grosso? No one thought that it was outrageous until the press got a wind of it and then they realized how incredibly crazy they were to agree to such astronomical figures.
I can’t blame the CEOs. If they can get the money…
Sandy,
This disparity – not only in income but also salary increases seem to be the way things are. Fair or not. That said, you make a great point in your comment above, asking “I don’t know why shareholders drag their feet with this”.
I tend to think that many companies are simply overpaying for CEOs, when you look at many of these individuals’ salaries. Simply astronomical. Thing is, as Krantcents pointed out, there are many company leaders (particularly in private companies) that aren’t paid anywhere near some of these salaries.
This seems like low hanging fruit, in terms of a way to reduce costs over the long run. Might be easier said than done to employ such a philisophical change.
Agree with you though, in that it’s hard to blame the CEOs for taking the money if it’s offered.
It is true that the CEO gain the most in good condition but do not forget, that the CEO will loss the most in the bad condition also. The pay seems equal with the responsibility in here.
I imagine it should be manageable for CEO’s to engineer these astronomic compensation packages with the complicity of boards packed with bought-off directors.
This stuff just makes me laugh. One could honestly get upset but what’s the point? It’s exactly like politicians, they all say that even though they have to cut jobs and services and blah blah blah, that they’re the ones doing all the hard work so their raises are justified. Same with these CEOs. What they fail to realize is that most ‘ordinary’ workers have been putting in extra effort and many have been doing amazing things, but that gets swept under the rug. It’s all about profile and influence.
This doesn’t surprise me. I’m guessing athletic stars haven’t received any cutbacks in salary, either?
It’s all about the golden rule: “He who has the gold, makes the rules.”
I can’t even fathom spending that much money per year! Does he really need that spare airplane hanger full of Lamborghinis?! Ugh.
Ahhhh, it must be nice to make millions and not be accountable for the share price, even if it tanks by 50%!
Good for them. Jealousy will get me know where… so kudos!