Friday, July 07, 2006
CEO Pay Better Than Ever - Even For A Job Poorly Done
CEO pay is bigger and better than ever. It is now 262 times that of the average worker - $10,982,000 versus $41,861. The pay ratio didn't reach the 100-to-1 mark until the mid-nineties. In 1965, the average ratio was just 24-to-1, and in 1979 it was still a modest 35-to-1. In 1989, during the flowering of Reaganomics, the ratio had climbed to 71-to-1, and it has grown like a turd blossom ever since. What gags us most righteously in the fact that CEO pay continues to balloon even when performance sucks.
A study released by the Corporate Library entitled "Pay For Failure" analyzes the problem of such egregiously unearned compensation and has fingered some of the main offenders. Henry McKinnell of Pfizer wins the Golden Dunce Award, earning $78 million in the past five years and scoring a pension package of $83 million, while during the same time span Pfizer's stock fell 35 percent. "Shareholders are getting hammered twice: Once for the bad performance of the stock, then because they have to foot the bill for that pay package," relates Brandon Rees of the AFL-CIO. "It?s salt in the wounds." Raymond Gilmartin of Merck is another pharmaceutical kingpen to whom you can point and say "Here is a mind on drugs", earning $54 million in the last half decade while his firm's stock plummeted 41 percent. Edward Whitacre of AT&T is yet another gilded nincompoop, raking in $85 million in five years as his company's stock scraped like the ground like a live wire from a broken T-pole, swooping down 40 percent.
How can such non-performers earn so much? The problem lies with cronyism as the top. Board members are often personally selected by the boss man, as are his successors in many cases. Worse yet is that many board members are actually former CEOs, so both the board and the boss are essentially brownies from the same batch. The compensation committee on Pfizer's board, for instance, includes three former Pfizer CEOs. To expect fair judgment under these circumstances is like packing a jury with the family of the defendant. It is clearly impossible, and that is why CEOs get paid what they like, regardless of the consequences to the average shareholder, much less to their employees.
"CEOs near record on pay ratios" from msn.com
"5 lousy CEOs who get fabulous pay" from msn.com