Saturday, February 11, 2006

Executive Pay

Where did the idea come from that the chief executives at large American corporations should be paid 431 times as much as their average employees?? In 1972, according to Executive Excess 2005 (from United for a Fair Economy,, U.S. executives made 42 times as much as their average workers. In 34 years the ratio has increased by an order of magnitude; actually, in 1990 it was only 107-to-1, so in the last 25 years the ratio has quadrupled. I guarantee, the pay of the guys on the bottom has not increased at this rate. In fact, it hasn't kept up with inflation, or only just.

The only thing that has improved about this ratio is that it isn't as bad as it was in 2000, when it hit 525-to-1. Amazingly, after the dotcom bust, and the Enron and Worldcom messes (not to mention Sarbanes-Oxley), corporate boards actually did start to pay less, tie raises to corporate performance, etc.
And it's worse in the defense industry since the "war on terror"; the CEO of DHB Industries (bulletproof vests) made 3,349% more in 2004 than he did in 2001. Nice work if you can get it. Can we spell "profiteer"?

It all comes down to this: senior corporate executives are said to do "more important work" than the guys on the factory floor, or the people carrying the duty pagers, or the front line sales people who deal directly with customers. Therefore they are "more important" than these people, and should be paid commensurately more. Four hundred times more?? Without the guys on the factory floor (metaphorically speaking; almost no one actually works on a factory floor any more), the CEO wouldn't have a job at all; just consider the nervousness at Disney after buying Pixar, due to the number of lead animation people at Pixar who are on record as saying they'd rather skate in Hell than work for Disney.

I have to wonder whether we might not still have some manufacturing jobs here, if it weren't so "necessary" to pay the CEOs such ridiculous amounts. Yes, yes, I know: at 400 to one, it wouldn't save all that many jobs. But it doesn't help; and it plays holy hell with morale. The real problem (see my next post) is the pervasive attitude that "I'm more important than they are."


  1. Stephen7:41 AM


    What about the chief executive of our country. Pres, VP, Senators, all of whom receive their annual salary for the rest of their lives? I don't think they are doing a good enough job to warrent that kind of retirement pacakge. No wonder Social Security and Medicare will never be fixed. They don't have to deal with it why should they care. When I think of all the good that could be done with THAT money we will never see, I hit a slow burn.

  2. I wasn't even thinking of that, Stephen, but it's right on point. Sigh. I suppose we wouldn't want a situation where a retired President of the U.S. was panhandling on the street (although for Dubya I might reconsider), but I agree that the current arrangements leave a lot to be desired.

    And remember - they get lifetime health care too, at a level most of the country can't even dream about. But that's another post...