Sunday, February 27, 2005
CEO Comp up Again
Friday's Wall Street Journal reported that average CEO compensation at 100 large U.S. companies was up 46.4% in 2004. It must be nice to be able to vote yourself a raise. I checked my investment portfolio and it certainly wasn't up 46.4% last year. Cost of living? According to the Mercer worldwide survey of cost of living, NY was the roughly the same as the previous year. Why, oh why, do CEOs deserve big raises every year?
As Rakesh Khurana of Harvard Business School has documented, company performance is tied more tightly to general economic conditions and industry trends than the brilliance of an individual CEO. Still, CEO comp continues to skyrocket -- now 160 times the pay of the average worker.
Excessive CEO pay is a disservice to shareholders, employees, and customers. The question is what to do. Writing to the heads of the mutual funds and companies in which you are invested is one step. Also write to your legislators to push for laws that create more transparency and rights for shareholders.
Then, if you are an average Jane or Joe, sit back and wait for your riches to arrive: Salary.com predicts that you can expect a 3.7% rise in 2005. That's way up from the 3.6% average in 2004.
As Rakesh Khurana of Harvard Business School has documented, company performance is tied more tightly to general economic conditions and industry trends than the brilliance of an individual CEO. Still, CEO comp continues to skyrocket -- now 160 times the pay of the average worker.
Excessive CEO pay is a disservice to shareholders, employees, and customers. The question is what to do. Writing to the heads of the mutual funds and companies in which you are invested is one step. Also write to your legislators to push for laws that create more transparency and rights for shareholders.
Then, if you are an average Jane or Joe, sit back and wait for your riches to arrive: Salary.com predicts that you can expect a 3.7% rise in 2005. That's way up from the 3.6% average in 2004.
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Excessive CEO compensation has been a problem for years, why I remained a pimp consultant for years instead of getting into the salary pool. I was in Dave D'Allesandro's office a few times back at JH, and saw excess up close. Also, many of the women I consorted with during over the years I used to call CEO groupies; they'd come out of college, then try to land themselves an executive class man to live off. Many were successful, actually.
I don't know the solution, individual companies will not reform CEO pay, willing to fork over fortunes to the "magic fix" they think they find... HP thought they had hired a Belichick in Carly, but they ended up with a Pitino. However, if she had increased overall profits, would anyone have complained about her?
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I don't know the solution, individual companies will not reform CEO pay, willing to fork over fortunes to the "magic fix" they think they find... HP thought they had hired a Belichick in Carly, but they ended up with a Pitino. However, if she had increased overall profits, would anyone have complained about her?
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