Bill Pitz <bill@pitz.net> wrote:
> jon@dakota-truck.net wrote:
>> [...]
>>> Is the CEO so much more valuable and important a person that he needs
>>> his 7 figure salery, stock options, bonuses, and perks?
>>
>>
>> In a word, yes - because the pool of people who can do what he does
>> is very small. The responsibility is huge and so are the benefits.
>> If you paid your CEO less, you would tend to attract sub-par
>> applicants or your existing CEO would be stolen away by another company
>> willing to pay them more.
> This really is exactly it. (Mind you that there are also a lot of
> "CEOs" around who are NOT making this kind of money -- ask everyone who
> is a small business owner. Each and every one of them is a "CEO" in
> their own right. Being primarily self-employed, Jon, would you say that
> you are foolishly overpaid? ;-) )
Hey, you're right! I'm actually 4 CEOs... I should get at least
one golden parachute! I just got screwed over by the system yet
again! ;-)
> Unfortunately, I think "CEO" is another word that has been
> over-dramatized in the mass media to make a better story. The truly
> exceptional CEOs out there really do deserve the compensation packages
> that they receive. I'm not one, and I probably never will be, but that
> doesn't make me feel differently about it. A truly exceptional,
> remarkable CEO is incredibly difficult to find -- and the business is
> very dependent on that person. In a truly challenging company (startup,
> struggling company, etc.), the CEO is responsible not only for guiding
> the company but also for providing and maintaining the inspiration and
> confidence of every employee in the organization. Without a strong
> leader, most young or struggling companies eventually fail or end up in
> bankruptcy. If you want to succeed -- and succeed BIG -- you need a
> rock solid leader.
True enough. Another aspect to this, which came to me last night
as I was drifting off into blissful slumber was to look at CEO
compensation in relation to total company profits. I think the one
that got everybody all up in arms was the retirement package given to
Lee Raymond of Exxon Mobil not quite a couple of years ago. It was
reported to be $400 million when you included all the stock options
and perks. Just for the heck of it, lets throw his annual salary of
about $50 million into there for a total compensation of $450 million
in a single year. The company made $36 billion in profits that year,
so his compensation package was 1.25% of the profits. In other words,
if this percentage stayed the same and Exxon Mobil made $1 million in
profits that year, his yearly salary and retirement package combined
would amount to $12,500. His salary would make up less than $1,400 of
that.
I took a look at other CEOs and its the same story. There are
lists of the top paid executives all over the place and many include
the yearly profit or loss for that company, and the total compensation
for the CEOs seems to run around 1-3%. So if you paid the "CEO" of a
small business the same rate, a CEO of that business which had a
$100,000 profit would be paid $1,000 to $3,000 per year.
So as it turns out, I guess I *am* one of those foolishly overpaid
CEOs, because I make a *heck* of a lot more than any of those guys - on
a percentage basis. :-)
They are being paid a lot of money in absolute terms, but when you
look at it on a percentage basis, they're actually some of the most
*underpaid* people on earth! (Hey, there's another one of those
things where reality is the opposite of perception - I love when that
happens!) :-)
My analysis based on percentage is actually completely superfluous,
since the justification for CEO compensation is already rock solid
based on the previously mentioned rarity factor, but I thought it was
something interesting to think about and throw into the mix.
--
-Jon-
.- Jon Steiger -- jon@dakota-truck.net or jon@jonsteiger.com -.
| '96 Kolb Firefly, '96 Suzuki Intruder, Miscellaneous Mopars |
`-------------------------------- http://www.jonsteiger.com --'
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