Friday, June 13, 2014

Great Men, great pay? Why CEO compensation is sky high.

By Nancy F. Koehn, WashPost, June 12 at 3:05 PM

Nancy F. Koehn is a historian at the Harvard Business School. She is also a director for Tempur Sealy International and Fashion to Figure.

Why are so many chief executive compensation packages so outrageous? And why do they continue to roar ahead of most workers’ pay?

According to data released this month by executive-salary tracker Equilar, the 200 most highly compensated U.S.-based CEOs in 2013 received an average pay package of $20.7 million — including salary, cash bonuses, stock-based awards and other benefits. Each of those 200 executives took home more than $10 million in total compensation. At the top of the chart, Cheniere Energy’s Charif Souki pocketed $142 million, Mario Gabelli of GAMCO Investors was awarded $85 million and Oracle’s Larry Ellison took home $78 million. In the 1950s, the ratio between chief executive remuneration and that of a typical worker in the company was about 20 to 1. Today, the ratio between the pay of Fortune 500 chief executives and that of the average employee in these organizations exceeds 200 to 1.

Blame for this disparity is often directed at boards of directors, particularly their compensation committees. Most board members of public companies are themselves well-paid executives, so they have incentives to approve large pay packages for men (and many fewer women) who are effectively their peers. Compensation consultants also play a role. By analyzing pay levels at comparable firms and reporting the findings to board members, these hired guns help sustain prevailing levels of pay. From the outside, this may look a lot like cronyism or poor corporate governance, and no doubt both are at work.

(More here.)

1 Comments:

Blogger Minnesota Central said...

OK, so CEOs make a lot of money, but do you think that an industry should get a 2.3% tax cut if their sales force earned a 5% raise last year?
Yep ... I'm talking about the medical device industry ... read this report that shows the income difference between genders (yeah, you already know it says women get paid less) but this :

Despite changes and concerns brought on by the Affordable Care Act, the new healthcare law does not seem to have negatively impacted the earnings of medical sales professionals. In fact medical sales average salaries are higher than ever. The average total medical sales income in 2014 was up 5% from 2013.

7:27 AM  

Post a Comment

Links to this post:

Create a Link

<< Home