We talked recently about the cap on CEO’s compensation for those who get the bailout money. Some are for and others against. Some people actually argued that $400k isn’t enough money for CEOs. Yet others argued that CEOs don’t work any harder than an average joe. Or a single parent working 2-3 jobs to make ends meet.
But I recently stumbled upon this awesome blog where the CEO of a major hospital ask the question “Do I get paid too much?” So what does this CEO get paid? Around $1 million dollars. Is that a lot? Well not compared to a lot of other CEOs. No way, no how. And certainly not even close to a bank, automotive CEO.
But really, are those other CEOs really working that much harder than this CEO? If he’s only worth $1 million, how can we argue these other guys deserve 20-30-40x that amount for a ridiculous sum? There is a huge difference between $1 million and $20 million. More than a few commentors said all CEOs salaries should be cut.
So the question again rises, how much should these CEOs really get paid? Are they really worth the $105M paid to Charles Prince of Citibank, or the $44M paid to Kerry Killinger of Washington Mutual, or $161M paid to Stanley O’Neal of Merrill Lynch.
Here we sit with a median family salary of $48k in the US and CEOs are raking in more than 1000x that amount in salaries? Where does that leave us? Is the discrepancy between the rich and poor widening?
36 responses so far ↓
1 Anonymous // Mar 4, 2009 at 10:21 am
They get paid way too much….do you see what is happening to their companies? They’re being bought out and going under. But yet they have tons of making getting raked in for being CEO. Please.
2 JoeP // Mar 4, 2009 at 11:16 am
All it takes is one company is a sector to pay their CEO a high salary, and then all CEO’s look to that as “what the market will bear” and use it as a negotiation point. No company wants to be known as the one that is cheap when it comes to executive compensation, so they follow suit.
I am not at all in favor of salary limits, unless taxpayer dollars are involved. For privately owned companies, the board members are ultimately responsible for defining most executive pay. The individual shareholder has virtually no control over the board, so the odds of putting someone in there to set standards for lower execute pay are slim.
In any case, I would be very much in favor of CEO pay being directly linked to well-defined GAAP metrics and stock value, and no golden parachutes.
3 D // Mar 4, 2009 at 12:53 pm
The reason we need the salary cap is because the gap between the haves and the have nots is too great. If middle class is not sustained everything will come tumbling down.
Newsweek–I think that was the mag I read this in-wrote that in the early 1980’s (I forget the exact year) the avg ceo made 40 times their avg paid worker. ……in 2004 that jumped to 400 times their avg. worker.
That is the problem…they deserve decent pay, but it must be closer range than 400 times their avg. worker. –Perhaps the cap should not be on the amount but on the amount compared to their avg worker. So if the company is doing great then they should be compensated…but so should the little guy that working for the company too!
4 don // Mar 4, 2009 at 2:56 pm
D and others. What are you thinking?
You want the govt to limit your freedom? limit yours or anyone elses pay??? are you nuts? go live in another country because you have lost the definition of freedom and capitalism.
You probably want the govt to limit what kind of car you or others can buy, what kind of gun you can buy, what you can watch on tv, or how many kids you can have, food you can eat, etc etc etc.
Go live in Socialist Europe!
5 Colettte // Mar 4, 2009 at 5:00 pm
The question shouldn’t be “Are CEO’s paid too much?” but “What are they paid for?”
They are often in the same position of weathermen, doctors, and attorneys in that they are paid for their expertise in the field. In theory if they get it right, they deserve to be rewarded. When they get it wrong, they get the slings and arrows.
Capping their salaries is a surface pretty solution. It sounds good and makes us all feel better about how this will all play out. We want to feel that a CEO is no better than the rest of us on a personal level. However, most people don’t have the type of expertise to run a large corporation. That’s why companies hire CEO’s. They are paid to make tough decisions, manufacture and sell a product at a profit, keep employees working and relatively satisfied in addition to keeping share holders happy (making money). Not as glamorous as it appears.
Obviously, CEO’s have differing levels of success and competence. But that is part of the game and if they are slick enough to come crying for their handout….it’s just part of their job.
6 Grace // Mar 4, 2009 at 7:42 pm
Years ago (OK, decades ago!) Robert Townsend, in his book “Up the Organization” argued that the CEO and the person who answered the telephones should be the two highest paid people in any organization because they were the public face of the company. I believe at that time, he thought $20,000 was plenty high enough for both!
7 Pearl // Mar 4, 2009 at 9:33 pm
Why does everybody gripe about what CEOs make, but you never hear anybody complain about how much Oprah makes, or Madonna?
Why did Evander Holyfield make a half or three-quarters of a million dollars for LOSING his last championship fight – involving only a few minutes of work? In fact, why do the losers in commercial sports competitions get paid at all?
Why was Nicole Kidman paid $17 million for appearing in “Invasion” when the movie LOST money?
Benerally, anybody who thinks a CEO is overpaid has the absolute freedom to not buy stock in that CEOs company, or sell it if you have it. If you think the pay is proof that the company Board is incompetent and the company will go down the tubes, you can short the stock and make money off of your superior wisdom.
I don’t believe what a company CEO makes is anybody’s business but the Board of Directors and shareholders of that company.
And I’m a little tired of hearing about how the gap between rich and poor keeps growing. Folks, think about it for a minute: Rich and poor in those statistics is measured by annual income. You can’t make less money than zero, but the maximum you can make is infinity. Of course the gap is going to widen – it’s pretty much a mathematical inevitability unless there is a complete financial collapse, but so what?
If last year you made $50,000 and your “rich” neighbor made $500,000, but this year you make $55,000 and your neighbor makes $506,000, the gap between you widened by $1,000. Are you worse off somehow? Of course not.
But I see a lot of people who would rather forego their own advancement if they can only succeed in dragging down someone else who’s currently doing better.
While it is true that greed is considered one of the cardinal sins, so is envy. And greed is reflected not only in the grasping for money, but the grasping for power.
Right now, there’s no one more greedy in the country than the politicians who want to dictate what the employees of private companies should make, and want to seize trillions of dollars of additional taxes from the American taxpayer.
8 fengshui // Mar 4, 2009 at 10:44 pm
“You can’t make less money than zero, but the maximum you can make is infinity. Of course the gap is going to widen – it’s pretty much a mathematical inevitability unless there is a complete financial collapse, but so what?”
This is in reference to those who are able to “survive” and those that aren’t. Some people work VERY VERY hard, physically, up to 60 hours a week, just to figure out that they can barely pay rent, health insurance, and food. My dad has been a union welder for 25 years. He has actually had his income DECREASE for the past 5 years because the 2% raise he gets is negated by the inceases in health insurance premiums, copays, and deductibles he has to pay, etc. It is sad. But, there isn’t a lot else he can do right now. There are no other jobs, he feels fortunate to be staying in his…..
I think that what people are mostly griping about is that CEO’s are getting paid an exobitant amount of money, just to have the company fail and get bailed out by the government…. and this business of the “socialists” blaming the “conservatives” and the “conservatives” blaming the “socialists” is getting SO FRIGGIN’ OLD. Can we just come up with a realistic way to move forward, past all of this crap, PLEASE?
9 fengshui // Mar 4, 2009 at 10:48 pm
“Right now, there’s no one more greedy in the country than the politicians who want to dictate what the employees of private companies should make, and want to seize trillions of dollars of additional taxes from the American taxpayer.”
When these “private companies” fail and expect a handout from our “socialist” government, and it is MY taxdollars that are going to be used to by some CEO or executive a $75k area rug or a $50k antique desk for thier office, or a $1million bonus, then heck yes, I’m GLAD our president is putting limitations and guidelines on some of this…..
10 Don // Mar 5, 2009 at 7:58 am
fengshui
THE GOVT SHOULDN’T BE GIVING THE BAILOUT IN THE FIRST PLACE.
the companies can ask and it is not the govt, or my tax dollars, responsibility to do that. So your argument that the govt should place restrictions is bogus.
AND OF COURSE PEOPLE ARE GRIPING ABOUT WHAT CEOS MAKE
when they make millions of dollars and their companies fail then it is the share holders that take it and lose money. if you are not a share holder you have no right to be envious or care what a ceo makes. they earned it and you can do my working your way up to that position if you want to. Your arguments are ridiculous. You want the govt telling your dad how much he can make welding? He has the CHOICE to get out of a stupid union who holds down his wages and get to a real company that will pay him what he is worth and not pay everybody the same because they are in a union. PEOPLE SHOULD NOT ACCEPT STANDARD ANNUAL INCREASES. Welders are one of the biggest careers right now and they are begging for people. you should get more money based on your abilities and that goes for ceos too. but if you are stuck in a labor intensive blue collar job your prospects of moving on up are limited. so don’t bitch about you can’t make as much as a ceo. get another career to try and make more money.
11 Don // Mar 5, 2009 at 8:10 am
http://www.indeed.com/q-Welder-$100,000-jobs.html
$100,000 jobs for welding. in this economy? i thought there were no jobs.
http://www.usa-labor.com too
12 D // Mar 5, 2009 at 10:14 am
Don. if you you read my whole comment then you would see that I am no for capping as much as making the difference between the avg worker and the top dog a little closer COME ON who thinks a person deserve 400 TIMES MORE THAN THE AVG WORKER FOR THE COMPANY! If the company is succeeding then it should benefit the company–that is CAPATALISIM…..but not just the one guy sitting at the top. He should get some dough but is should be within reason of his workers. I don’t even have a problem of it being 40 times the avg workers pay…BUT 400 is just GREED and ridiculous. The little guy is not the greedy one.. while they get a teeny tiny raise of 1 % to 2% for inflation while the ceo gets a 1/2 million dollar bonus…who’s being greedy in that RATIO.
I am not for bailouts and I am not for capping, but I am for some system that makes a little more common sense than the current greedy one that is ruining our great country.
13 LivingAlmostLarge // Mar 5, 2009 at 9:58 pm
Don, kinda a moot point about the leverage. The government already did it under Bush with AIG and Lehman. So it wasn’t exactly the socialist, unless you consider bush a socialist? Nah, he was all for free market crap until the shit hit the fan.
I am not for capping the salaries until the companies got government money. Then the government as a large stockholder should dictate how much a CEO makes.
14 LivingAlmostLarge // Mar 5, 2009 at 10:06 pm
Pearl, I am frustrated that we are paying sports stars millions of bucks for what?
By the way, there has been a market correction somewhat for baseball stars. Quite a few took a paycut I read this year.
And if ticket sales are down, I wonder, how much more of a paycut they will take?
Do you really think Yankee stadium with it’s new luxury boxes will be sold out like before? I read the new york papers and they doubt it. Before the companies were buying them up, right now they aren’t….I wonder what happens to all the projections of sold out games?
15 fengshui // Mar 6, 2009 at 1:24 am
‘He has the CHOICE to get out of a stupid union who holds down his wages and get to a real company that will pay him what he is worth and not pay everybody the same because they are in a union.”
I looked at the link provided, and the job that I saw posted for $100k was for a mechanical engineer, which requires a 4 year degree. My father doesn’t even have a degree. Just some technical training for welding. And my parents own a home, and my mom has a job in the area as well, so it isn’t as if he can just fly all over to do temp work. He also has a chronic disease, so he has to keep his benefits like health insurance, without interruption. It isn’t as easy as people think to just “up and get a new job” especially when you’re 55 years old and have significant health problems where you can’t have a lapse in your health benefits/ coverage. I’m not saying that I don’t think that my father could have made better choices in life, he could have attended college, etc. However, to sit and “blame” the union? I’ve worked for unions, and the hospital that I just left was union and paid quite a bit more than the 2 other private sector hosptials in town. Unions are not necessarily all evil. They are intended to advocate for workers rights, fair “living wages” and affordable benefits. It is also all of this “rich vs. the poor” and each think the other is the scum of the earth and it just so sickening.
16 fengshui // Mar 6, 2009 at 1:26 am
“So it wasn’t exactly the socialist, unless you consider bush a socialist? Nah, he was all for free market crap until the shit hit the fan”
ROFLMAO
17 fengshui // Mar 6, 2009 at 1:27 am
“I am not for bailouts and I am not for capping, but I am for some system that makes a little more common sense than the current greedy one that is ruining our great country”
Thank you. This is the most rational and intelligent thing that I’ve read today….
18 fengshui // Mar 6, 2009 at 1:34 am
“so don’t bitch about you can’t make as much as a ceo. get another career to try and make more money.”
It is this mentality that is so far from reality, I don’t even know where to begin….. Hmmmm. Ok. Just get another career. Sure. We’ll just pull one out of our arse. No problem. I mean, heck, it only took me 10 years to get a doctorate so I could land a job that pays $90k a year (I have an interview next week- keep your fingers crossed)…. It took so much energy, money, sweat, and tears to get where I am today. It isn’t as easy as you think to just “start over”. It takes money, and lots of it to go back to school, pay tuition, loss of income for attending school, and lots of TIME. Degrees that are going to earn you 6 figures are MBA, JD, MD, and other graduate degrees like nursing, pharmacy, some engineering. Those degrees take MANY YEARS to get!!!!! Seriously! I appreciate the hard work and resources that it takes to land the type of job that I have (advanced practice nurse), and I know how hard it is to climb to the top, so quit acting like it is as easy as signing up….. Geesh.
19 Don // Mar 6, 2009 at 7:55 am
that is the problem with people like you. you will bitch and complain and make excuses. you can go to welding school, take a loan because they are giving money away, and in a few years make $100000. http://www.aca.org/workforce/pdf/AnotherWorkplaceShortageOnTheHorizon.pdf
Yes, making money and having a good career takes hard work and it isn’t easy. but you are the dumb ass that spent 10 years getting indoctrinated by the liberal profs to get your doctorate to make less than $100000. lol. Sorry had to get that in there
All I am saying is America is so lazy and thinks that someone else needs to do something for us and we make excuses. And then once they made all those excuses (cant move, mom has job too, etc) they bitch about their situation. So the govt should have made it much easier to make more money for them. IT IS CALLED PLANNING PEOPLE. poor planning as a nation, stupid bush but I blame congress more, to get us into this mess and americans for getting themselves into the situations they are in.
And yes we should BLAME the unions. THE UNIONS OR GOVT TAKE COMPANIES OVER OR RUN THEM AND THEY FAIL. Liberalism to blame. failures include GM, Chrysler, Ford, post office, fannie mae, freddie mac, etc etc etc.
20 Barb1954 // Mar 6, 2009 at 9:06 am
There is corporate greed in all businesses, even in those in which there are no unions involved. It’s the reason why the parent company of the publishing company I worked for decided to move our company from the city where it had been founded and done well 23 years before to another city where a “sister” company was located. 75 employees lost their jobs from the educated and highly skilled (editors, graphic designers, managers, accountants) to the low skilled (customer service, receptionist, warehouse workers, telemarketing sales people).
Has the company done well with this move? Did sales triple? Well first, they had to restaff the entire company, finding a new creative team skilled in the niche market (educational books for K-12) that we were in. And now, not even two years later, that wise parent company has put both our old company and the “sister” company up for sale. The decision about that company move now seems pretty stupid. (Oh, did I mention that the executives who made that decision are long gone with their golden parachutes.)
To blame union workers for the downfall of a company or an industry is ridiculous. It is the shortsighted, poor management of white collar workers who are making the big bucks to make the right decisions that screw things up for everyone. Either they fix things that aren’t broken or they fail to take the bold leadership that once built this country and its companies in the first place. The government has absolutely nothing to do with it.
21 Barb1954 // Mar 6, 2009 at 9:17 am
It’s corporate sponsorship and advertising revenue that have driven the salaries of sports stars whether they be golfers like Tiger Woods or those who play on football, baseball, or basketball teams. I can see that changing in the foreseeable future. Will Buick still be able to sponsor “The Buick Open” golf tournament? Will companies continue to buy exaggerated advertising rates for a 30 second commercial during a football game? Will they pony up millions for naming rights to a stadium? I don’t think so.
As for Oprah Winfrey, she owns her own company, employs hundreds if not thousands of people. As long as she has viewers for her TV show and movies, and listeners for her radio show, she’ll earn money. But the economic downturn has affected her as well. Her decorating magazine, “O at Home,” has ceased publication along with at least four others I subscribed to and many others. It’s advertising that pays the bills for magazines and newspapers, not subscribers. When companies can’t afford to advertise, ventures will fail and put more people out of business. Our economic system is a sticky web that affects everything and everyone.
22 don // Mar 6, 2009 at 2:27 pm
Plus why do you think you need a degree to make money. MBA Doctorate JD etc. This country was built by people with NO DEGREE. Liberalism at it’s best. Rich Dad Poor Dad philosphy. Entrepreneurism. Or people like your dad built this country. They didn’t rely on a stupid degree. College is great for some people but most then rely on others to create their worth, their safety net, their plan, etc.
This Reliance on others (Govt, unions, etc) philosphy is ruining our nation.
23 Barb1954 // Mar 6, 2009 at 3:38 pm
Well shit, Don, I don’t know about you, but if I have to have surgery, I hope to hell my doctor has a medical degree. Need a will drafted or someone to help with a lawsuit? I’d pick someone who actually has a law degree.
Rich Dad/Poor Dad? Hmm . . . use other people’s money to buy lots of real estate that can be resold for a quick gain. We can see how well that’s working out for people. It’s not a coincidence the shows “Flip This House” and “Flip That House” are no longer on the air.
24 Don // Mar 6, 2009 at 10:08 pm
barb, you missed the point. just like others you hear and read what you want to hear and read. Of course we want educated doctors and lawyers. the point was that you dont have to have a degree to make over $100000.
Liberalism believes that you have to go to college and get a degree to make money. Poor dad philosphy.
I would say you don’t need a job to make lots. You make the job. own business, own assets. Not flip houses. Dont rely on others to provide your income or your safety net or to provide your education.
And rich dad was right. He said a crash was coming based on all this debt, govt and personal.
25 fengshui // Mar 7, 2009 at 1:00 am
Don, you’re an ignorant @ss. Seriously. I wonder if you have any friends with your callous nature. I went to school for as long as I did because I have a gift of being able to help people. I love what I do as an advanced practice nurse, and I feel that each and every day I can help people and improve their lives. I value my education, and I worked damn hard to get where I am, and if that makes me a “moron”… well, I guess that people like you would be up sh*t creek when you’re sick and need someone like me.
26 fengshui // Mar 7, 2009 at 1:06 am
Don, it takes money to make money. And now, it is near IMPOSSIBLE to get a decent paying job out of HS without a degree. How the hell are you going to start your own business with no down payment, no capital, no assets? Oh, that is right, we can work at McDonalds for $8 an hour and then “save” enough to “start a business”….. Sure. What planet are you living on?
27 fengshui // Mar 7, 2009 at 1:12 am
Also, Don…. my advanced degree is my “insurance” that I won’t have to rely on the government…. As a professional in the medical industry, jobs are pretty damn secure and I have benefits such as medical, disability, long term care insurance, etc. So, I likely will never have to rely on the government for anything… whereas someone with a HS degree who had a business fail and nothing to fall back on, would now probably qualify for WIC or Medicaid if one had children…..
28 fengshui // Mar 7, 2009 at 1:16 am
I also don’t think that Don heard me say that my dad is almost 56 and has hepatitis, so just “moving to another state for a better paying job” isn’t an easy thing to accomplish. My father can’t just “quit his job” and be without medical coverage. And his union welding job actually provides good health insurance, even if the premiums do keep going up. He may need a transplant in the next few years, so just up and moving isn’t a possible. It isn’t as easy as people like Don say it is. My dad will need me to take care of him, and if him and my mom moved away, they would be alone.
29 Barb1954 // Mar 7, 2009 at 8:51 am
fengshui, people like Don just want someone to blame for the problems of the world or for people who think differently or have different lives than he does. Heaven forbid he turn a spotlight on the past eight years of a failed administration as the cause of many problems we’re facing today. No!!! It must all be the fault of the liberals.
30 LivingAlmostLarge // Mar 7, 2009 at 2:45 pm
Wow, I leave for a day or two and then get back to reading.
Don, I hate to point out but before getting a college degree was a luxury. Most people will agree that you could raise a family on a job straight out of high school. Nowadays that isn’t the case anymore.
It does take a lot of money to set up business. It’s $5-10k just to incorporate a business and set up the liability. It cost money to buy a truck, insurance, join a union, or get licensed.
Example, my HVAC guy hired other HVAC guys to work for him. Why haven’t they all struck out on their own? Because according to the guy working for the head honcho, it costs money to buy the truck, equipment, insurance, workman’s comp, etc. It’s certainly not cheap or easy to get started. The owner’s of the business have done so for a long time. It’s a family company.
I do believe that there are jobs you can make a lot of money without a degree. They do take a lot of work and effort. For example, most people I know working sales are NOW required to have a bachelor’s. I believe say 20 years ago maybe it wasn’t the case, but many companies not require it.
Also Don if you blame Congress, the Congress was Republican from 1994 to 2006. Remember the contract with america to lead us back to morality. How’s that working out for ya?
Barb, I think there is a lot of corporate greed in every industry. Otherwise why would so many industries be having trouble? Banks, cable companies, phone companies, automotive, home repair, retail. I don’t think there’s an industry not hurting.
I believe we won’t be moving towards more doctors because the AMA refuses to increase the number of doctors to keep the salary high. Instead we’ll just have one doctor signing off on a lot of nurses, nurse practioners, physicians assistants, etc. Sort of a one chief, many indians.
Don, rich dad, poor dad was a load of crock. The guy was just talking about real estate and it didn’t work out.
But we’re in the middle of a perfect storm and which way we end up I’m not sure. But FWIW, I like reading the CEO of a major hosptial’s thoughts.
31 Kristy @ Master Your Card // Mar 10, 2009 at 1:22 am
Man, this is just as much a hot topic this time around as it was last.
Personally, I’m all for capping a CEOs salary, but I’ve revised my position that the cap should be at $400k. IF the company is successful, then I think $20 million should be the cap because CEOs have a specific specialization that not everyone can do, just like any other job. But, if the company is failing, then I think the CEOs salary should be reflected accordingly. Why should companies cut salaries and lay off workers when their own CEOs are not taking wage cuts. However, this stipulation is on publicly traded companies where taxpayer dollars come into play. On privately held companies, I don’t care what they do, so long as they’re not asking for a handout at the end of the day.
32 Amanda // Mar 10, 2009 at 4:32 pm
CEO compensation packs are ridiculous considering that in many cases they get the stock bonus, salary and other perks even if they get fired. Why should a company spend 40 million dollars to fire someone? Think of what that 40 million dollars could be put towards like research and development, better healthcare for their employees, 401k matches, buying locally made products, etc. I think companies need to stop this ridiculous game of how can we get the best CEO by bribbing them and focusing on how they can make the best company with how the market in their industry is going.
Capitalism works best when there is oversight and rules that must be followed rather than letting everyone figure out the best course.
34 LAL // Mar 10, 2009 at 9:07 pm
Definitely I agree with capping for companies getting tax payers dollars, but otherwise I guess I shouldn’t complain.
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