Wednesday, May 18, 2011

Champagne Wishes and Caviar Dreams

I share with you below a brief piece on executive compensation.  At the end of the brief piece, I have several questions:

CEO pay levels increased at a marked rate over 2009, buoyed by strong company performance, according to results from the Wall Street Journal/Hay Group 2010 CEO Compensation Study, which examined how CEOs at large companies were compensated across all forms of pay in fiscal year 2010.

The study focused on the primary elements of compensation for CEOs of the 350 largest U.S. companies to file their final definitive proxy statements between May 1, 2010 and April 30, 2011. Among the findings:

After two years of declines, total direct compensation for CEOs jumped 11 percent in 2010 to $9.3 million.

Base salaries remained flat at $1.1 million, while annual incentive payments increased by 19.7 percent to $2.2 million, yielding a 12.8 percent increase in overall cash compensation at $3.4 million.

For the first time in two years, long-term incentives grew by 7.3 percent to $6.2 million.

Pay levels aligned with strong results in company performance, with surveyed companies achieving a median 17 percent increase in net income and providing a total shareholder return of 18 percent.

“CEO pay has been under significant scrutiny, and some may have expected to see a different outcome in the 2010 proxies,” said Irv Becker, national practice leader of the U.S. Executive Compensation Practice at Hay Group. “But don’t let the figures misguide you," he added. “The real story is under the hood of executive pay. Many companies have re-structured programs to align pay with performance by putting greater emphasis on performance-oriented long-term incentive programs.”



If we continue to reward CEOs short term success in the markets, aren’t we incentivizing behaviors that are counter-productive for our nation’s long-term economic health?

The large income gap between the richest and the poorest within a country is one of the defining factors of Third World nations.  It is a source of tension and sometimes violence in these countries.  Shouldn’t we be more worried about the expanding chasm between the uber-wealthy and the rest of us? 
If these guys are the “job creators” who need lower tax rates and more loopholes, why is unemployment continuing to hover at 9% at the same time executive pay is up and corporate earnings are up?  Following the “job creator” logic we’ve been fed, shouldn’t these companies with expanding bottom lines be hiring?

How could these results reported by The Wall Street Journal be true during the administration of someone we are told is extremely “anti-business’?

In 1950, top executives earned 24 times the average worker's pay, 122 times in 1990 and 550 times in 2009.  Is this healthy for America?

How long before I am accused of being anti-success, communistic, unpatriotic, or worse, for pointing these things out?

Could it be that we are not being sold the truth?

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