I came across this story from the New York Times today and will paraphrase. I thought you might get a kick out out of it. You’ll understand what I mean after you read it.
Here goes:
The heft of an executive’s pay packet used to be a matter of only passing interest outside the corporate community. The highest-paid executives, ranked in business magazines each spring, were seasonal celebrities at best, envied by their peers, attacked by corporate gadflies. Yet, suddenly, executive pay has become a national issue.
“Executive pay is the real hot-button issue for institutional investors,” said James E. Heard, president of Institutional Shareholder Services, an adviser to big investors. “It’s typical of what’s wrong with American management and why the U.S. is not more competitive economically.”
The multimillion-dollar paychecks of executives, critics say, are to the ailing American economy what Imelda Marcos’s 3,000 pairs of shoes were to the troubles of the Philippines — a powerful symbol and a symptom of deeper problems.
The justification for high executive pay is that some corporate leaders deserve their rewards as much as sports and entertainment stars do. And most management experts agree that some chief executives deserve astronomical pay, especially if they start a company or save one.
The criticism of executive pay points to a larger issue: American corporations are too often managed by executives who are not directly accountable to shareholders but to the directors whom they typically select. That lack of accountability, the critics say, makes American companies insular and less competitive internationally. Congressional Proposals. There are already bills before Congress that would change the way executive pay is determined or restrict it.
Most experts say the Congressional efforts are helpful in bringing national attention to the issue, but pressure from large institutional shareholders, the main owners of Corporate America, is the more appropriate way to change the way executives are paid and companies are run.
…the sharp rise in the stock market last year will mean a big jump in total compensation for executives during tough times. According to an estimate by Stephen O’Byrne of Towers Perrin, a consulting firm, the stock market surge last year means a gain of $2.63 million for the average chief executive in the 100 largest corporations in America…
In short, chief executives on average could triple their basic salaries, to nearly $4 million, simply because of the stock market. To be sure, executives may not have cashed in those shares and options last year. But it is a big gain all the same.
These chief executives are giving all their critics a very big target,” said Robert A. G. Monks, president of Institutional Shareholder Partners, an advisory service for big investors.
One provision sought by shareholders’ groups and institutional investors is that executives should not be able to exercise their stock options unless the company’s share price has risen a set amount, usually 25 percent or more, over five years, insuring that rewards are linked to long-term performance and not swings in the stock market.
Whatever the reasons, executive pay soared in recent years while the inflation-adjusted wages of manufacturing workers declined by roughly 10 percent in the last decade. The income gap between top executives and workers has doubled over the last 15 years.
FYI: this article was written on January 20, 1992 by Steve Lohr. You can read the entire article here along with a list of the highest paid executives at that time.
Some things never change!
