By Dominic Jones
EXECUTIVES of the Standard & Poor’s 500 companies that filed proxy information in the first half of this year received a combined $4.16 billion in 2006, according to the Associated Press.
In a lengthy article that is part of a special report on executive pay hitting mainstream newspapers across America over the weekend and this morning, AP business writer Ellen Simon reports that half of the executives earned more than $8.3 million.
The highest earner was Yahoo! Inc.’s Terry Semel, who took home $71.7 million even as his company’s stock price languished.
I’m quoted in the article talking about the fact that it’s not just the lack of plain English in pay disclosures that is a problem, but the fact that there’s a huge disconnect between the methods used to pay executives and the experience that the rest of the workforce has with how they themselves are paid.
CEOs and other executives are compensated via such a complex variety of schemes that it takes page after page in proxy statements to explain them. All the while, the reader is thinking about their own pay check and they’re wondering why theirs is so simple to understand and the CEO’s is so convoluted.
This breeds deep distrust. People can easily imagine gray-suited men in smoke-filled rooms sipping Scotch and dreaming up all manner of deceptions to siphon off billions to themselves without anyone ever really being able to decipher what it is happening.
Needless to say, executive pay is bad for the image of CEOs and for big American corporations. It’s also the major reason for the persistent low levels of public trust in them.
See also:
Hundreds of CEOs top $8.3M pay mark (USA Today)
Jets, golf, yachts, beer: CEOs rake in extras (USA Today)
SEC chief finds ’sea change’ in compensation reports (USA Today)
Dominic:
You may want to be more careful with your headlines. This posting discusses the disclosure, complexity and public perception of executive compensation. It does not present any evidence that CEOs are not worth their pay today, or support the assertion that they will “never” be worth their pay.
Roger,
The point I was trying to make (probably not very well) is that it doesn’t matter what “the facts” are because almost no one can understand them.
And without understanding there can be no public acceptance. Of course, if people did understand how compensation works, executives might have a bigger problem on their hands than they have now.
Ignorance is bliss…