CEO's are Overpaid - Get Over It
By Al McClain
A recent study by the Economic Policy Institute showed, that in 2005, the average CEO in the U.S. earned 262 times the pay of the average worker, and made more in one workday than the average worker earned in a whole year.
OK, so we're all outraged. Outraged! In 1965, the average U.S. CEO earned 24x the average worker; by 1989 the figure was 71x; and by 2000 the figure reached 300x. Since then, there was a significant decline and now we're back on an upswing, with the average CEO now earning almost $11 million per year. And, we're outraged. Outraged! But, not really.
Typically, in a RetailWire discussion on a topic like this, there would be many postings at the unfairness of it all, how it's trends like this that are ruining business, and on and on. But we can't be surprised, or even outraged, because outrage can't last this long, can it? This has been going on for a long time, and we all know it. And, CEO's aren't the only overpaid superstars around. How about entertainers, authors, and sports figures?
The recently released Forbes 100 Celebrity List showed that author Dan Brown earned $88 million in the most recent 12 months, to rank 10th overall on the "celebrity appeal" list, and earned attributes of "intelligent" and "talented." (These are actual categories.) Kobe Bryant earned $31MM, with attributes of "physically fit" and "talented," and ranked 25th. The rankings are really a hoot, if you're looking for something to take your mind off CEO pay (click to view). Donald Trump - #12 – earned $44MM and gets attributes of "aggressive" and "confident."
For further perspective on the issue, here's an excerpt from an interview with Ken Lewis, the Chairman and CEO of Bank of America, in Saturday's New York Times:
Q: How would you explain why Ken Lewis is paid the way he is and receives a $3.5 million annual pension?
A: We want to be very competitive in all of our compensation packages as it relates to the market. Quarterbacks get paid more than some other players. That's the analogy. We are paying very competitive market rates. It's nothing more than that. I know that we pay for performance. That's the way it should be. I hate the fact that some have abused the system and have given all CEOs the black eye. I think we have a very appropriate compensation policy.
Moderator's Comment: What companies (retailers or suppliers) would you cite as having great top management that is compensated well because they deserve it? Are there "best practices" in terms of CEO and top management pay such as pay for performance or a maximum CEO to worker pay ratio that you'd recommend companies in our industry adopt?
Rather than be "outraged" at CEO pay, let's leave that to the pundits who solve societal problems. Instead, let's look to CEOs in the retailing industry who are well paid but are performing well and deserve what they make because they are driving successful companies that serve consumers well. - Al McClain - Moderator