The rich are different than you and me. Bill Gates once bragged the IRS needed two computers to process his taxes and argued that the city of Redmond, WA should value his Taj Mahal of a home completely worthless because it’s so big and personally customized no one would ever want to buy the place.
I’m not against a person making a buck – or in CEO’s, athlete’s, and movie star’s cases – a lot of bucks. When they perform well they can make a lot of money for others. That’s not necessarily bad, that’s capitalism. But without a reasonable limit to the largess, everyone loses. Inflated movie star salaries drive ticket prices to $10 a pop. Athlete salaries frequently make sport facilities unprofitable and drive ticket prices so high, you have to mortgage your home for a sunny afternoon of baseball.
But CEOs? They’ve gone over the top.
The Dark Suits
According to a recent Editor & Publisher article, Yahoo – whose profit and stock performance has been in the toilet lately – paid CEO Terry Semel $71.7 million last year. Many people argue giant-sized compensation packages are justified for what the dark-suits do for the company, but Semel’s performance seems more a question of what he does to the company. Unless Semel makes money soon, many people – considerably less able to afford it – will lose their jobs and investors will lose on investments. However, if past corporate decision-making is any indication, Semel’s pay will go up despite the facts. Even if his compensation didn’t change a penny, returning $71.7 million would go a long way toward improving the company’s bottom line.
Financial analysts have predicted a compensation downturn for quite awhile but it just keeps rising. Federal reporting rules now require more robust explanations in corporate financial statements, but because of the unbelievably complex nature of compensation plans it’s almost impossible to tell how much a CEO makes. The analysts, many of whom advocated these plump salaries in the go-go 90s, grossly under-estimated how little boards would do to reign in the costs. That seems a short-sighted view that ignores boards of hand-picked sycophants who also receive lots of butter on their bread.
Funny, that sounds a lot like Congress.
Are these salaries fair? No, but that doesn’t matter. There is lots of unfairness in the world. Are people jealous of them? Yes, but that doesn’t matter either. Are they justified? Eh. Some people believe in the trickle-down theory, which suggests the wads of cash grow a more robust economy. However, trickle-down seems like an inefficient way to do that – and I’m not alone in that belief. But the final analysis begs the question, is it common sense to lavish that much money on one individual? I emphatically believe, no.
Can a person really live any better on $71.7 million than say $10 million? Is the best way to stimulate trickle down through yacht and bizjet sales? Hardly. Would employees and investors fare better and gain greater returns on their investments of sweat equity and money is CEO salaries were trimmed? Yes. It would be nice if more CEOs had common sense and actually plowed as much money as possible back into the companies they run.
It is, after all, what they’re hired – and lavishly paid – to do.