Are CEO Salaries Justified?... YES!

That brings me back to your first point

It should instead bring you to thinking of doing an article on the corruption and lack of transparancy of of lobbying (comment meant friendlier than it sounds)

i actually really like that idea. i think i will....

that was one of the best responses to a challenge I have seen at Newsvine lol

looking forward to it

Undoubtedly the same people who argue against raising the minimum wage with economic theory while real human beings slave day-in and day-out for basic necessities like food, shelter, health care and education. Some people just don't seem to remember or care that we live in a society.

And some people realize that money isn't created out of thin air by just signing a piece of legislation.

And some people realize that money isn't created out of thin air by just signing a piece of legislation.

You're right about that -- check out the Federal Reserve: they do it without having to go through legislation of any kind. I notice that you didn't comment on the actual content of the article nor the crux of my comment, so I'll just take that as a tacit endorsement of everything else I said.

Fact is, the only people who think it's ok that CEOs steal this kind of ridiculous wealth are greedy, selfish and self-serving people who one day aspire to that level of excess themselves. Undoubtedly the same people who argue against raising the minimum wage with economic theory while real human beings slave day-in and day-out for basic necessities like food, shelter, health care and education. Some people just don't seem to remember or care that we live in a society.

How is assuming this blanket statement, calling people greedy and selfish, related to the article?

Unless your some altruistic god who never does anything for himself, get off your high horse.

It's stealing the very food out of the mouths of the people that do all the work. The middle class is disappearing and the gap between rich and poor is vast. When a company can't pay people well-enough to live, then the executives turn around and buy yachts and $100,000 greens fees, I call it stealing. God forbid everyone should be able to eat and sleep, get health care which is vital, or send their kids to well-funded schools. Instead the elite get all that and more, and for everyone else, it's too bad, you should have worked harder. And on top of it all, they steal money from people's pension funds. Enron isn't the only company to do it -- they just got caught. Go worship the dollar if you want, at least I know my soul and humanity isn't for sale.

How is assuming this blanket statement, calling people greedy and selfish, related to the article?

Joshua, the article presents a defense of exorbitant salaries to an elite class, at the expense of everyone else. I don't know about you, but I call that unadulterated greed and rampant selfishness. If you can't see that, then I really pity you.

When a company can't pay people well-enough to live, then the executives turn around and buy yachts and $100,000 greens fees, I call it stealing.

And I call it capitalism. Face it, the system we live in is entirely based on greed, and that's what makes it work. Is it morally defensible? No, but it does work.

Works for, what, 1% of the nation? I think that's a weak definition of something "working." As I've said, when people starve to death in the streets and others can't spend money fast enough, I fail to see how by any measure you can call that something which "works." Just because it's the way things are doesn't make it right.

And I call it capitalism. Face it, the system we live in is entirely based on greed, and that's what makes it work. Is it morally defensible? No, but it does work.

That's why we have Governments. To keep runaway capitalism in check.

Joshua, the article presents a defense of exorbitant salaries to an elite class, at the expense of everyone else.

Expense of everyone else? Really? They don't personally reach into my pocket and take my hard-earned money. In fact, the only organization that can legally do that is the government.

Some businesses do that through subsidies, but again, that's government.

I don't know about you, but I call that unadulterated greed and rampant selfishness. If you can't see that, then I really pity you.

I really pity you. Instead of being grateful of the market process of wealth creation, you seem fundamentally opposed to it. Do you live in a state of perpetual envy and hatred for people who make more money than anyone else?

How is voluntarily entering into a contract where a person does some work, and the other party pays the person for that work, rampant selfishness?

What many people don't understand about true capitalism is that, in order to create any wealth at all, you must provide something another person wants or needs. You must serve them. In fact, true capitalism is the only economic system where you have to serve other people consistently in order to be rewarded. You don't serve, you don't get rewarded. If you want to be selfish and gain a lot, you must serve many, many other people. Can't get much more human than that.

Works for, what, 1% of the nation?

Well it works pretty well for me and I fall in the bottom half of the nation economically. Its worked well enough to create the highest standard of living the world has ever seen. I'm greatful to live in a system that allows people to live like we do. If someone works harder than me and is rewarded better for it than good for him.

That's why we have Governments. To keep runaway capitalism in check.

Exactly, but I don't think someone earning $100 million is runaway capitalism. I think thats just an example fo someone with good business sense.

Joshua...they most certainly do reach into your pocket to help large corporations succeed.
Whether that's IBM, or Raytheon, Boeing, or the bailout of American car companies under bankruptcies. These companies are given essentially corporate welfare in defense contract research funds, how nice if all corporations could qualify for research dollars in the hundreds of millions of dollars, and when they find something worthwhile they get to keep the patents and reap the profits from the research.

The kicker is YOUR tax dollars paid for those non-descript research projects, and the companies get to start a new division with 50 million in profits before they hire a single person. That my friend is not capitalism, but rather entitle-ism with you footing the bill.

Sometimes it's difficult to understand, but there is a reason all of these budgets are black.

Forest

Forest,

I'm well aware of all of that. We do not have true capitalism in this country, but a form of mercantilism. I mentioned subsidies in my comment, and that it is indeed theft of the American people. These companies can't get Americans to give them money voluntarily, so they enlist the help of the monopoly of force. It's an unholy alliance that should never be.

When oil company executives take home 400 million in a single year it essentially violates a moral value.

Nail. Head. HIT! Great comment, Forest.

After 43 years, this man took Exxon to new heights and had built up this $400 million pay day for years and years- it's not like he took home $400 million every year. From what I can tell, this man needs to be given a pat on the back for what he did for the company.

This is my problem pal, what exactly did he do to make that company as successful as it is. Today's huge profits come not from the fact that oil prices have gone up, although even if taking that into consideration what did he have to do with it. What's happening from a profit scenario is that the oil companies aren't funding the new projects to find new oil, the amount of oil to get just doesn't justify the risk involved in garnering the oil. Since peak oil has been reached, nothing will change the fact that oil prices will keep rising. Let's face the facts that oil is the only energy that has a 30/1 return, the best that any other source has is 3/1 return on investment. So if the study has been done than you'll have to specify...exactly...what he has done that's so spectacular, aside from patiently waiting for our oil reserves to dry up.

If I am exactly the reason you wrote this article than I require more research, clearly much more specific, and I submit to you that they're not going to give you the documentation.

Forest

Forest,

I agree
there are some quality GIANT firms where the CEOs don't rob the shareholder

P&G for example.

I think most of us can agree that CEOs should be well paid but when we get too far above a few million it starts getting obscene. When it gets to 400 million then it is material money out of shareholders pockets 50 million is offensive, 400?.

When it is the awards to failures like the BP CEO it is just plain corruption

The other big problem I have with a lot of these corporations is that their profit is taken without bearing the true costs of their production. In the petrochemical sector in particular you have the "heroes" of capitalism like Jack Welch at GE when in reality GE has been horrid as a corporate citizen. There's a whole division in the Pentagon just to deal with their contract frauds. They have been poisoning the public with waste, like PCB's that they knew caused cancer by 1937 and now the diagnose as a business. Their history of human experiments and crime is endless yet who is touted as a great American business model? That to me doesn't deserve a golden pay package but handcuffs and a pole to gather trash.

That to me doesn't deserve a golden pay package but handcuffs and a pole to gather trash.

amen.

Hence the very problem with our idea of "corporations." The whole idea of having this entity declared "human" for legal purposes by nothing more than a government decree fosters and breeds the corruption you mention.

But if people still don't agree with a CEO's salary, they can pull their investment dollars out. And if they don't have anything invested, then they shouldn't have any say in what they pay their people.

When those CEO's sit upon virtual monopolies like oil and agriculture like giant ADM and Congress feeds them tax dollars and policy prevents fair competition we can't cut our funds.

Most of this ADM corn money is for Monsanto's gmo stuff, that I can barely avoid by refusing to purchase anything with the word corn on the label. Tough task but guess what, 176 other items like Vitamin C can appear and it is really gmo corn. So tell me again how I can vote with my dollars when the SOB's hide their actions seven ways from Sunday. Here's how they earn their money, they steal it and call it policy!

If they have policy protecting their income it is every bit my right to have a say. I call foul!!!

Babar - I just would like to characterize my criticism as slightly different from some others. I am an investor - a capitalist - etc. But that doesn't leave me to blindly support 400 million. Shame

Actually Babar my problem stems from the fact that the very ones who run the companies make the laws to suit themselves. I have no problem at all with someone who creates a business, Bill Gates, Steve Jobs, Hugh Heffner, any of them who make something that they own and profit from.

On the other hand there is a circle of friendsters who are obscenely overpaid for jobs with no performance measures. To have the airline executives getting over $3 million bonus as the pension is rolled to PBGC makes as much sense as giving a bonus to the security guard who held the safe open for the thieves. It doesn't pass the smell test. Beyond that we have so much Federal Aid going to the richest companies.

Goldman Sacks got $1.6 billion for 9/11 recovery and this year they had $40 million dollar bonuses. The workers at Ground Zero got no money and now they are dying from toxic exposure and don't have health care. It takes government working for the corporate thieves and they use the mega salaries to pay for the seats that then legislate for them. Lobbying is the official term but it is like organized crime, with loopholes.

Just an fyi here, my degrees are in finance and international economics and I did quite nicely among the enemy camp so the hostility is not rooted in an inability to grasp the "value" of commerce but of a view from the inside and a loathing of cheats.

But these executives didn't write the legislation.

The politicians didn't just wake up one day, and say, "You know, I think we'll give $X billion to X industry." These things are lobbied, hard, with millions coming from corporations for campaign contributions through various channels, corporate junkets, etc. It was even worse in years past. To say, "Well, the executives didn't write the laws," seems, to me, to be an attempt to totally absolve them of complicity in this game. They asked for them; sure, the politicians could have/should have said no; but the executives aren't blameless here.

Maybe you'd like to look at the study done by conservative Cato in 1995 above, the situation is worse now. In fact much of the organized crime of subsidies goes back generations and companies like Bechtel have been at it for half a century or more. Two small examples of a vast problem which is almost as simple as my analysis.

Bechtel's bonus program from having inside influence...

In 1942 McCone and Stephen D. Bechtel obtained a contract to build aircraft at Willow Run in Alabama. The War Department agreed to pay all the company's costs plus 5 percent on work estimates presented by Bechtel-McCone every six months. A 300-acre factory was built and 8,000 employees hired to staff it. However, no aircraft were built. Employees were paid for doing nothing. A local man, George P. Alexander, discovered details of this scam and collected affidavits from workers who admitted that they "went in every day at 9.00, punched the time clock, then went home". They then returned to the factory at 5.00 to "punch out".

Alexander filed suit against Bechtel-McCone in federal district court on 31st July, 1943. He claimed that the company had made "many and various claims against the government of the United States, or a department or officer thereof, knowing such claims to be false, fictitious or fraudulent." However, the judge dismissed the case. The problem was with the contract, not the claims by Bechtel-McCone. As John McCone admitted to Fortune Magazine on 17th May, 1943: "Every six months, we estimate how much work we expect to do in the next six months and then we get a fee of five percent of the estimated amount of work regardless of how much work we actually do turn out."

Bechtel-McCone was also involved in another scandal concerning war contracts. Lieutenant General Brehon Somervell, head of the Army Sources of Supply Command, decided to build "a major refinery at the Norman Wells oilfields in Canada's Northwest Territories, and run a pipeline from there 1,200 miles southwest through the Yukon Territory into Alaska."

The contract to do this was given to John McCone and Steve Bechtel. The terms of the contract were very unusual. The Bechtel-McCone Corporation was guaranteed a 10% profit on the project. The other surprising thing about the Canol Project was that it was to be a secret contract. It seems that Somervell did not want anyone outside the War Department and the Bechtel-McCone Corporation to know about this deal. The reason for this is that Harold Ickes, as Interior Secretary and the head of the Petroleum Administration for War, should have been the person who oversaw this project.

The $35 million for the project came from within a massive war appropriations bill that was passed by Congress in April 1942. After working on it for a year the cost had reached over $100 million. It was finished in May 1945. However, the wrong sized pipes had been used and it was discovered that to pump the oil it cost $150 per barrel rather than the $5 estimated by Somervell, Bechtel and McCone. Less that a year after it was finished, the plant and pipeline was abandoned. It had cost the American taxpayer $134 million.

After the war the "General Accounting Office told a House Merchant Marine Committee investigation that the company had made $44,000,000 on an investment of $100,000. The same committee a few months later complained that Mr McCone's company was "paid $2,500,000 by the government to take over a shipyard costing $25,000,000 and containing surplus material costing $14,000,000."

Tommy Corcoran was not the only person arranging for people like McCone, Kaiser and Berchtel to obtain lucrative government contracts during the war. John L. Simpson was a close friend of an interesting group of people including Allen Dulles, John Foster Dulles, Dean Acheson and William Donovan. In 1942 Simpson was recruited into the OSS by Allen Dulles. His official title was chief financial advisor for the U.S. Army in Europe. In 1944 Simpson returned to San Francisco and became a consultant to the Betchtel-McCone Corporation. His arrival brought even more contracts from the War Department.

Bechtel also got the Big Dig fiasco in Boston, still hosing taxpayers and funding sellout politicians.

The government offers these CEO's protection of a crappy minimum wage why isn't there a reciprocal on how much the extreme of abuse is going the other way. Because they have a suit and a jet means that no regulations should govern thee actions, dump toxins and be free of the responsibility because it is only a job but get mega millions you're so essential.

Make these Boards and top level folks accountable for their corporate crimes and then they can get the big bucks. This is power without consequences. They have no skin in the game, the only losses are other people's money and they cash in no matter what they do, that's not market compensation it is a game rigged for the House.

Pamela,
I agree that if they break the law they should be held accountable to the fullest extent. However, I do not view making $10 million in and of itself a crime.

Babar,

There are several problems with hyper-rates of pay for some CEO's.

The most basic is that it is theft from the owners of the company, the shareholders. That money belongs to the company owners and should either be returned to them, or re-invested in the business.

It is the functional equivalent of you deciding to embezzle a few million dollars from your employer. It is wrong to take money that doesn't belong to you.

It is wrong for the Board of Director's to approve these pay packages: it is a breach of their fiduciary duty to the owners of the company, the stockholders. As other have pointed out, these boards are functionally corrupt. They are typically selected / appointed by the CEO, and lavishly paid to be on the board. then they turn around and give the CEO obscene amounts of the shareholders' wealth. (Oh, and stock-options are also taking money from the existing shareholders.)

And Shareholders do not typically get to vote on CEO pay.

It is also bad business: look at the opportunity cost. Compare paying some CEO $210 million to paying the CEO $10 million and using the extra $200 million to grow the business, invest in R & D, employ more salespeople, invest in improved efficiency (making more money down the road), or giving $50,000 bonuses to your top 4,000 employees. There are better things to do with the money.

Also, studies have shown that the money is not the actual incentive - these people ahve more than they and thir grand children's grand children will ever need. It is all about th eego - they point to what other CEO's are making, and want to be paid more than the next guy. That's it. Greed and ego. There is no materially different performance form these people from paying them $10 million or $100 million.

Publius, personally, I have no real problem with someone making $10 million a year (though after 2-3 years - what will they do with all the money?). You also ask why the government is involved. Here are three reasons:

1) Personal tax rates. We reduced the top marginal tax rates, and top exec pay rose to obscene levels. This society was founded on a more egalitarian model. The way this wealth is being concentrated in a few hands of an elite few at the top, being taken away from those at the middle and bottom is bad for our society and our economy from a fairness and moral level. And this leads to social unrest, and REDUCED motivation and productivity from the workers and innovators. Also, some large companies donate to charities and communities instead of overpaying their senior executives. What if one company's $200 million was instead reinvested in improving the educational opportunities of some of our children?

2) This is bad for our national society/economy. Again, these people are NOT reinvesting the profits in improving the economy. Typically they are laying off people, outsourcing jobs to foreign countries, reducing by buying competitors and then eliminating good organizations. There is a huge difference between taking profits out of an organization versus reinvesting in a successful business. The net effect is a weakening of our overall economy.

3) These people are typically only able to amass this stupendous wealth in a couple of years by taking advantages of inequities and loopholes in our legal system and society. What is the purpose of our government and society? Is it only to benefit the already extremely wealth to the detriment of the poor and middle-class? Or is it to improve the overall levels of opportunity, fairness and the general welfare?

These obscene paychecks are not helping anybody but the few that are part of a corrupt inner-circle, and they are hurting everybody else.

Mr. Merrill,
With respect, I have to disagree with your misrepresentation of facts. In public companies, the Board of Directors is NOT appointed by the CEO. This is flat-out wrong. They are elected by the stockholders/owners. If you are not a stockholder/owner of a company why do you care what a CEO makes? If you are a stockholder/owner and you feel the board is making bad decisions with your money then vote the board out! Too many stockholders sit and complain and wait for the government to swoop in and solve their problems. If these same people directed their energy into changing what she/he can change, a difference can be made. Too many people would rather spend the energy complaining than trying to effect change.

Babar but your Boeing example proves nothing

Again, I am fine of the Boeing guy makes millions. He is a stud. Pay him. Now if I am a shareholder - in other words his boss - and he earns 300 million - that makes me sick.

It is no argument to say some gus are good so overpay is fair.

management leadership, for one thing, is overrated. i know. i'm in big business. all i can say to my revolutionary friends about that is that i gots to pay the bills or i go to jail, simply because i happened to have a high-paying job when my wife took off, so i'm locked into a high salary for the rest of my life. anyway, yeah, i work for a big company, international.

it's not the management who defines the success of a company. management's decisions, especially those made by a great leader, are critical to the success, but no more so than the execution of those plans by staff.

to me, the perks — pension, benefits, freebies, etc., more than suffice to compensate great business leaders for their job well done and make it so that a salary that makes sense, which provides an equitable percentage of profits going back to staff, is justified, and figure-head salaries or bonuses based on nothing or severance packages for CEOs which could fund the unemployment stash for entire states, are not justified. if a corporate leader spends 5 years turning a company around, and a staff-level employee spends his adult life doing everything he's told by management, and actually talking to customers, manufacturing product, inventing ideas, etc., that employee deserves 1. more of a severance should things go bad, more in line with what CEOs get now (proportionately) and 2. better salaries.

we have locked the american citizen into a middle class that is decreasing in value every year, in order to, very simply, maximize profits, which then go to the CEOs.

no, that is not justified. boeing employees have their @!$%# together and they will be there long after a CEO runs out of steam.

how many executives are in a rush to find someone who can do the same job they're doing for less money?

great point! and that is how all management treats its employees, per policy, daily.

CEOs already have, obviously, power. money is power, too, so all we're doing is pushing more and more from the shorted scale to the overloaded one.

Lulu-
Are you saying that in most countries, CEO's are paid less than the average? I think you meant 20 times.

The US Market will adjust when
1) The owners of the companies want to pay their employees less
2) The international CEO's take jobs in the US for less than current US execs

Move those 0s over. Thanks.