More than 80 percent of respondents to this week’s RBJ Daily Report Snap Poll say CEOs of U.S. public companies are paid too much.
After two years of flat or declining pay, CEOs at major U.S. corporations saw their compensation jump in 2010, according to an analysis done for the Wall Street Journal by the Hay Group. The median value of salaries, bonuses, long-term incentives and grants of stock and stock options for the CEOs of 350 major companies surged 11 percent to $9.3 million, the newspaper reported.
The biggest pay gains came from bonuses, which soared 19.7 percent as profits recovered from the recession. The newspaper noted that earnings and share prices for these companies rose even more than CEO compensation: Median net income increased 17 percent and return to shareholders, including dividends, rose 18 percent.
When compared with a similar poll last year, slightly more people in this poll—86 percent—said CEO salaries were too high. In the 2010 poll, 82 percent of readers said CEOs’ pay generally is too high.
A similar large majority in the new poll said companies don’t do a very good job of linking CEO pay to performance.
More than 630 readers participated in this week’s poll, which was conducted May 23 and 24.
In general, how would you describe the compensation paid to CEOs of publicly held corporations in this country?
Too high: 86%
About right: 14%
Too low: 0%
In your view, do most public companies do a good job of linking CEO pay to performance?
The current level of CEO compensation is both absurd and obscene. I think the latest statistic shows that it is over 400 times the level of the average wage earner in America. The ever-widening gap between the haves and the have-nots was a portent of the fall of the Roman Empire and the French Revolution, among others. Let’s wake up before we get that far.
—Alan Ziegler, Rochester Area Business Ethics Foundation
What are you buying when you hire and compensate a CEO? You hope it’s a manager with sound decision-making and leadership skills. Unfortunately, you don’t acquire 10 times as much skill in a $10 million CEO as you do in a $1 million CEO. Your board, however, wants the (false) assurance that stems from overpaying the new CEO.
—Kevin Moriarty, Redcom Electronic Manufacturing Services, Victor
CEO pay is dictated by the market. If the board has adequate oversight, then it is difficult to say they are overpaid. They are paid what the market says they should be paid.
—Mike Kaser, Penfield
Frontier is a great example: Working people from this community are shut out of even modest raises while the CEO reaps huge rewards. Frontier workers are our neighbors and spend their checks in our businesses. Let’s keep more of those profits right here!
—Tom Gillett, NYSUT
The difference between the pay of CEOs (and other upper management) and “workers” (everybody else) is way out of whack. There is no rational reason to support the huge difference. While leaders are integral to the performance of a company, nothing happens without the people doing the work. We have somehow created a workplace where peoples’ work is way over- or under-valued with no clear path to correcting the problem. At this rate, we will simply eliminate the middle class and create two classes: super-rich and everyone else. This is simply not sustainable.
Who else but a CEO can have their cronies approve their outrageously generous pay package while delivering substandard results? Some of these people nearly destroyed our economy, and we pay for it. Some CEOs do a decent job, but a large majority takes advantage of their position to line their pockets. The shareholders should be able to tell them they are too lavishly paid, but the board is the only one with that power now, and they have an interest in keeping the salaries high. We need them to get the same kinds of raises and benefits regular employees get with the same kinds of accountability. Instead, their pay packages have increased many times more quickly than regular employees. What have they really done to deserve it? We all work hard and increase our valuable output every year, too!
CEOs of companies that they’ve started deserve whatever they can get. They risked their own capital to start. If I don’t like it, I can sell my shares. CEOs of other publicly traded companies are just hired guns with no skin in the game, no personal stake. They win big even if the company does poorly and the shareholders suffer. The committees who recommend their compensation are just a bunch of good old boys who are waiting for some reciprocity when their pay package comes up. Shareholders have few options. They can vote against the compensation plans, but I have yet to see a proposed, bloated compensation plan fail. The compensation plans are also so complex, it is almost impossible to judge how the CEO is getting paid. Other than that, you can sell your shares. Not too many options. Probably the best thing that investors can do is invest their equity holdings in index funds and take the guesswork out of the decision.
—Rowland Billy, secretary and past president, AAII Rochester Chapter
Top CEOs are like top sports figures and deserve to be compensated for good performance. They take the blame and are criticized when things are bad and should be rewarded when things are good. I also believe that employees should (and will) begin to see better paychecks when we finally see the economy growing at a normal pace. If that does not happen, then they should stop complaining and go where the money is better (if they can find another job). Don’t forget that most companies lost a lot of money these last few years. Most had to borrow heavily or do other things just to survive the Great Recession. Those loans must now be repaid and reserves rebuilt. That is where a lot of these recent profits are going, and smartly so.
—George Thomas, Ogden
All CEOs and their direct reports are paid too much and receive too many perks, benefits, bonuses, etc. Few of them have been paid appropriately as their companies have declined and they have laid off their workers. This insane idea that the company boards have to pay and compensate them a lot to get good talent has not worked and should be universally rolled back. This probably will not happen, though, because the boards are in the same situation, getting paid a lot, with benefits/allowances, for attending very few meetings. This situation was especially prevalent within Kodak, communication cos., financial cos. and insurance cos. Many of their decisions have caused the decline of the company as profitable units were sold off to "focus" on what they thought was their core competency. It turns out that the CEO’s could do almost anything they wanted, perform poorly and not receive any decreases and in many cases get raises. All while money was being wasted and employees were being laid off and stock holders watching their values decline. Going back to the George Fisher days, Kodak could have saved about 100 engineers’ jobs if George’s salary was reduced by $1M. He would not have missed it. This was a burdened rate and the company could have used those people to become more efficient or make new products. So the answer is a resounding YES. They are paid too much for the decision that are made on the backs of the employees beneath them.
When CEOs can offer raises to the people actually doing the work, then they can give themselves a raise.
—Scott Riester, Comairco Equipment
Excessive pay for CEOs, CFOs and COOs has been a problem for decades; it’s not something new. With the economy in the dumpster and the little guy getting a token raise or no raise at all it is now time to make these CEOs realize that they are under a type of scrutiny that has never existed before. They should scale back the size of their bonuses.
What has gone on with executive compensation has been indefensible for decades and includes excessive compensation even when companies have declining profits, lower stock values and less market share. While such pay packages are defended as the result of market forces, nothing could be further from the truth. In fact and in spite of attempts at reform such as Dodd-Frank, executives sit on each other’s boards and set each other’s compensation packages. As they scratch each other’s backs, the power that excessive wealth brings is used to implement government policy that is to the detriment of our society. That history is front and center and yet some will buy in to the fantasy we recently heard from an oil company executive that this is "shared prosperity.” The only thing further than the truth than that quote is that these salaries are the result of real, competitive market forces.
—Jim Bertolone, president, Rochester and Genesee Valley, AFL-CIO
Companies (workers and shareholders) don’t link CEO pay to performance, chummy board members that rule the corporate pay scale approve outsize compensation. If "companies" paid CEOs what they are worth, then corporate chieftains such as Antonio Perez wouldn’t be compensated in 2009 $13 million and nearly $6 million in 2010. If he was paid on stock performance, he wouldn’t be paid at all. There are many other failed corporate leaders who took home millions more than was prudent, but the list would be too long for this space. The following was pulled from a website, but it shows the disturbing nature of CEO compensation “The ratio of CEO pay to factory worker pay rose from 42:1 in 1960 to as high as 531:1 in 2000, at the height of the stock market bubble. It was at 411:1 in 2005 and 344:1 in 2007, according to research by United for a Fair Economy. By way of comparison, the same ratio is about 25:1 in Europe.” This deserves another read: "The median value of salaries, bonuses, long-term incentives, and grants of stock and stock options for the CEOs of 350 major companies surged 11 percent to $9.3 million.” As small business struggles and as 14 million unemployed and 8 million underemployed workers try to find unavailable jobs, CEOs at many larger companies are reaping record compensation for shipping millions of jobs overseas and cutting employee salaries and benefits. In the opulent worlds of many CEO, it’s not a matter of getting paid what you are worth, it’s a matter of hiring a Board of Directors that will do your bidding. After all, what does every Board member want at some point? To be a CEO.
—Michael Thornton, Rochester
In light of our struggling economy and the continuing decline in the job market, it is outrageous that some CEOs are paid six-figure incomes plus bonus incentives as the companies they run post losses or modest profits at best. Trimming the fat at the top of Corporate America is one strong step to re-energizing the economy and the job market. Another important step is trimming the fat in government at both the local and national levels. The politicians are not representing the people; they are too far removed from the public they are supposedly serving and they are economically solvent as opposed to many of the American voters. We are a top heavy nation with great disparity between the haves and the have-nots.
—L. S. Decker, MVP Health Plan
It is capitalism at work, approved by a board of directors…leave it alone. Look at so called artists, actors and sports stars and it pales in comparison for the knowledge required. Let’s see; complain about the disparity in your bosses pay, then buy those overpriced tickets for concerts or sporting events while the celebrity gets far richer than a CEO riding from town to town to reap more discretionary spending – but that’s OK.
I continue to be amazed by the lack of public outrage on this issue. I have always believed that we want our business owners to be very profitable so that we as workers can share in that success, but it appears that the days of "sharing" in that success are going away. Low to middle income earners continue to give up wages and benefits, all in the name of a "tough economy" while the income of CEOs continues to grow in double digits. When is enough, enough?
No question they are paid too much, and the boards who support them are also paid too much. But the stockholders should demand accountability. The same pension funds that complain about greedy CEOs own the stock of those said companies and reap the rewards of the stock performance. It’s the Job of the stockholders to fix this.
A responsible and morally, ethically responsible CEO and Board would limit the pay adjustment parameters to be in line with the general workforce. To the extent reasonable those parameters should reflect overall company performance. However that does not happen because in today’s society greed and deceit trumps morality and responsibility. This happens in corporations, not-for-profits and especially in the public/government sector.
—Jim Weisbeck Bloomfield
At the risk of over simplification, when a company shuts an American factory to offshore production putting (xxx) number out of work, it’s sad to think that often a small portion of that annual CEO salary could have paid every employee in the factory that closed. As a conservative, I am tired of hearing the "rich people don’t pay their fair share" B.S. from the left. Instead of redistributing this wealth via taxes and unemployment, how about if the salary went down just a little and kept America working instead?
—David Fiegel, president, Blackbird Asset Services LLC, Williamsville
Good performance is expected at the CEO level. Only truly exceptional performance, when a company is faced with a serious challenge, should be rewarded generously. In addition performance measurements should not be limited to short-term goals like net income and current stock price.
There is very little connection between compensation and performance for most people in business today. C-suite executives receive ever increasing salaries, bonuses and perks independent of company performance. These executive have also simplified the lives of their employees by eliminating some words from their vocabulary – raise, promotion, pension, etc. No matter how well employees perform, how much money they save or how many sales they bring in, there will be no change in compensation, no pension will be offered and no opportunity will be available for promotion. If the employee questions this, they are quickly reminded that they are VERY fortunate to have a job and if they don’t agree they can be easily replaced by someone who will be paid less.
—Bill Wyatt, Fairport
Compensation should be correlated with overall company performance. I think what upsets stockholders is when a company does poorly and the CEO is rewarded with a bonus by the Board which is made up of many fellow CEO’s.
Although linking pay to corporate performance is appropriate, the levels of pay/bonus are obscene in many cases; more so in these difficult economic times.
Linking the pay of a CEO to the income of the company is sickening. These CEOs have almost nothing to do with the company performance. Contrary to business myth, it is the lower management, workers, and sales force, that is, the employees, based on excellent products that create the wealth of the company. It is unbelievable that hired hands like the CEO and his/her minions should get so much credit. If things go wrong, they put the damage on the working people: no raises, layoffs, taking away benefits, union bashing, etc. When their company misfunctions they talk themselves out of any liability. Classical local Company: Perez and his two predecessors at Kodak. The less money the company made and the more of their employees were laid off, the more money they got. They also ignored their only money-making product and destroyed it. Most CEOs in the US have no clue about the products of their company and the challenges in the marketplace: Case in Point: GM, Chrysler and Ford. The ratings in Consumer Reports for many years show how rotten their products were relative to their competition. It is eye-opening that the first time a GM car came up to the quality of the foreign competition was when the CEO and top management were removed and the Federal Government became a major shareholder! CEOs also fail as leaders. They are true giants in demotivating their employees. True leaders don’t stuff their pockets in good and bad years and claim good and bad times for not paying their employees, taking away their benefits, and bad-mouthing them as incompetent. Who gets excited to work for those persons? As an alternative see the business philosophy and the treatment of employees and customers at Wegmans. The past four years should have clearly taught us that the leaders of business can only do one thing well: destroy their Companies, destroy the national economy, make their employees unemployed, and demand hand-outs from the taxes that the Government collects, demanding tax reductions, and refusing to pay their fair share to keep the USA running, as well as supporting those who want to tax the recipients of the payments that those have paid for all their working life.
—Ingo H Leubner, Crystallization Consulting
Boards are looking for superstars, but there are few out there. It seems that the higher the comp the lower the long-term performance. Options require this-quarter results, relegating long-term growth and stability to the lowest priority, as we’ve seen over and over again. The solution is pre-1981 (even back to 1954) marginal tax rates in the 70% – 90% range over $200K. Rather than giving that 10% – 30% of the overage to the IRS use it to grow and expand into new and different markets, creating jobs and stability. This way doesn’t work, never has, never will.
—Art North, North Associates.
The stellar car salesman puts forth his best effort and sells more cars than ever and his commission, negotiated with his employer, reflects his hard work in a big check. The piece meal worker stitches buttons faster than ever and her performance is reflected in the size of the check she gets. In normal life there is a quid pro quo, in the life of the top CEOs of this country, this equation doesn’t seem to hold true, big companies lose massive amounts, stock falls, bad decisions are made at the top and for some reason, the top doesn’t pay the price, and instead they are rewarded with massive pay increases and bonus. We constantly hear criticism of the rank and file workers, the union contractors that supposedly aren’t worth what their pay is, despite the fact that they are doing the work of putting the product out there for the public. There has been a disconnect between performance and pay for top CEOs, and for the good of all of these companies their pay should reflect their contribution to the company. Out of orbit pay for CEOs reflect their out of touch attitude, with the rest of the workers, it’s time board of directors get with it and institute socially just pay policies.
—Joe Wierzbowski, Plymouth Photo Studio
5/27/11 (c) 2011 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or e-mail firstname.lastname@example.org.