CEOs Compensated Correctly, Vast Majority Of Shareholders Say

Despite growing income inequality, and global protests criticizing the wealth gap, CEO compensation now exceeds pre-recession levels, totaling billions of dollars. But the majority of corporate shareholders don't seem to mind that CEOs are netting such high pay.

Only 36 of 2,225 companies reported that shareholders voted against the pay rates of CEOs at the firms they hold stock in, Forbes reports (h/t Mogulite). The say-on-pay votes that were authorized by the Dodd-Frank financial reform legislation are non-binding, but they indicate little criticism of executive pay that in at least 25 cases exceeded the value corporations pay in total income taxes, a recent study by executive compensation research firm Equilar found.

Companies such as struggling Hewlett-Packard and mutual fund Janus Capital, reported negative votes. Meanwhile, other corporations in tenuous positions still have CEOs with huge compensation. Cisco Systems CEO John Chambers received nearly $19 million in 2010, even as the company's stock falling 31.4 percent in the fiscal year ending in July, 24/7 Wall St. reports. While Cisco's CEO raked in billions, the company announced that it would be laying off 11,500 employees.

Companies often determine CEO pay through a practice known peer benchmarking, which bases executive compensation not on the individual CEO's performance, but on what other companies are paying their CEOs. Partly as a result, median CEO compensation rose 27 percent in 2010, with CEOs at 299 corporations accounting for $3.4 billion in compensation combined, according to study from the AFL-CIO, the largest federation of unions.

Some CEOs get especially steep compensation packages, including JPMorgan's CEO Jamie Dimon, who took home a $19 million pay raise in 2010, and Goldman Sachs CEO Lloyd Blankfein, who raked in an extra $3.6 million in bonuses last year.

Not all CEOs are receiving big pay raises, however. Bank Of America CEO Brian Moynihan pay rate will reportedly remain flat in 2011.

Still, average worker pay falls well short of the gains made by executives. In 2010, worker pay increased by only 2.1 percent, a comparison some corporations are disinclined to make public. In fact, a current lobby known as the Center on Executive Compensation is attempting to undo a Dodd-Frank requirement that demands corporations report the median pay rate of its employees, as it would put executive compensation into perspective with the pay rates of average workers, The Washington Post reports.

Comments

[CTDFalconer]

03:10 PM on 10/26/2011

Why not simply cap executive salaries (total compensation) at the country's median wage times x, where x=100 to be reduced over a phase-in period of 5 years to stop at 50, which is still high but not ridiculously high. This might also give companies a little incentive to pay its employees a bit more. This has been done elsewhere.

[68Namvet]

09:15 PM on 10/26/2011

Because we are still a society that believes in the principles of freedom. The government should never cap the earning potential of anyone. We do, however, need new rules and regulations that will address the inequalities of the current system and give us a fair playing field.

[CTDFalconer]

12:14 PM on 10/27/2011

You are right, of course. The free market has been sold to us as a personal liberty issue and that regulations equal tyranny, which is utter nonsense. Mostly I put that out there for rhetorical purposes.

[KC Smith]

10:11 PM on 10/26/2011

Lets say.. we did that. We capped it. Along comes AIG.. and they get themselves in a huge bind.. fraud, funds going south, deals have baked, etc. It requires someone very special to come in and sort the problem out, but if we cap those saleries, then who would want to? Someone good enough to fix the problem is already rich, making +$10-20million a year with his personal holdings. Do you really think they want to tackle AIG and be treated by the public for a few million dollars they don't need? AIG would have no leadership and it would of lost hundreds of millions more before crashing. Instead someone took the job, put up with the crap, and limited the damage it did in exchange for a SMALL portion of what damage he saved the company from. CEO = PAY PER PERFORMANCE

[68Namvet]

10:59 AM on 10/27/2011

"CEO = PAY PER PERFORMANC­E "

If this were true, we would not have the problems we do today. In the 1990's, the CEO of AT&T lost $8 billion in the Oliveti deal - laid off 40,000 employees and received a $32 million bonus for cutting his expense to revenue ratios. The CEO of Goldman Sachs lost 100's of billions, helped crash the economy and received bonuses and a huge raise this year to $20.8 million/year. The former CEO of AT&T was just "fired" (asked to resign) for "totally ineffective leadership" and found to be "lacking in intelligence necessary to lead the corporation" - his parting salary was a mere $26 million for total failure.

The list of examples like this are long but, have one thing in common. CEO's are not paid for performance. They are part of a club, where board members pass on huge salaries to the CEO's of the various boards they sit on while the CEO's sitting on their boards do the same for them. You are not part of this club and should not be supporting it's policies.

CEO pay should be tied to performance and the long term health of a corporation, not a short term fix to a CEO created problem that only damages the corporation.

[CTDFalconer]

12:13 PM on 10/27/2011

That argument becomes meaningless in light of the fact that even in the depths of failure when companies are recording major losses and filing for chapter 11 protection, the executives are still taking on huge bonuses and bailing out with golden parachutes. Contrary to earning outsize compensation, they have been richly rewarded for abject failure. This has happened over and over. Furthermore, in the mid sixtes, executives were paid on average 24 times more than their median workers. Now the same number is near 300 times the average worker. Are they that much more important now than they were then? Compare US execs to other countries: US CEOs make 225% more than CEOs in the other top 13 industrialized countries. Are US execs that much more important than other countries' CEOs? By the measure of company profitability, no, not even close. Clearly something is out of whack in the US and it's not healthy for the country at large.

[68Namvet]

01:15 PM on 10/26/2011

The solution to exorbitant CEO pay can be addressed somewhat by resolving the funding issues of Social Security along with reforming one aspect of the tax code. Simply, we should remove the cap on FICA (currently at $106,000) and treat all income (specifica­lly capital gains) as ordinary income.

The CEO of Goldman Sachs salary will be $20.8 million this year. He will pay $6,572 in Social Security - and his employer (Goldman Sachs) will pay $6,572. These numbers are the same for a person making 1/2 of 1% of his pay. If he paid the exact same percentage as everyone else (removing the cap) he would pay $1,289,600 - his employer would contribute the same­. Of the over $144 billion paid in bonuses in 2009, Wall Street would have contribute­d over $18 billion to Social Security.

This serves two purposes. First, it would provide sufficient funds to continue Social Security for the foreseeabl­e future. Secondly, it would force major corporatio­ns to reconsider the huge pay packages offered to CEO's. As in in the case of Goldman Sachs - paying an additional $1.3 million on top of the $20.8 million may cause them to pause and reconsider - especially when it includes the COO, CFO, and all the VP's and corporate officers. simply put, pay structures would need to be reevaluate­d.

And, if we treat all income as income - stocks cannot be used to offset these taxes - and everyone is treated the same - fairly!

[KC Smith]

09:47 PM on 10/26/2011

Its not ONE person's job to pay a 1,000's peoples social security. We are a capitalistic society.. if you want a retirement, save up, pay in, and take it. If you don't work then don't expect a CEO to pay in MILLIONS a year to support a flawed and unfair system so people can retire that failed to pay in a reasonable amount. If they did pay in a reasonable amount they should ask their gov to hand that cash back over so they can invest it themselves. Everyone thinks they are entitled to other peoples money because they have more of it. Its not corporate americas job or the rich's job to fix social security. Its not major corporations job to fix gov programs -- its the peoples -- so get to work and fix it. If you treat all income as 'income' then our entire economy would collapse.

[68Namvet]

11:16 AM on 10/27/2011

I have a retirement, thank you. There is nothing flawed nor unfair about Social Security except that all people do not pay in the same percentage amount. You receive out of Social Security based upon what you pay in - so if you failed to pay in a reasonable amount you have very little to survive on. After 50 years of paying in, it's a little late for the government to give it back for me to invest - that's why I paid in for over 50 years and I AM ENTITLED to get my share out. I do not feel entitled to other people's money, I simply believe everyone should be treated equally. Even John McCain, who is worth several million, whose wife is worth millions, who has a Senate Salary and a military retirement, draws his Social Security. AND HE IS ENTITLED TO VERY CENT OF HIS RETIREMENT AND SOCIAL SECURITY!

And, treating all income as "income" would hardly cause our entire economy to collapse. What caused our entire economy to nearly collapse was the republican philosophy of "redistribution of wealth" ,the stupidity of "supply side" economics of tax cuts for the wealthy and the "national security" policies of unneeded "star wars" programs and unneeded real war with Iraq - which provided no security and after wasting more than $1.5 trillion in Iraq and has no hope of providing ANY benefit to America for the investment of blood and treasure.

[Clemgo3165]

06:07 PM on 11/01/2011

You really don't understand Social Security, do you?

[brux]

01:12 PM on 10/26/2011

This article is basically a lie. There is no way the majority of stockholders were asked or polled, and if some were I doubt they were commenting on anything but their own company. This is the reason so many Americans hate corporations - everything they do or say is a lie. No one minds companies making money, but selling out the country, lying, false advertising, spinning, buying influence, and then taking money and bonuses when they do bad for their own company, the economy, and the country as whole is unacceptable.

No wonder Occupy Wall St. does not have a clear agenda - how do you even break through the BS built into the whole system - any real discussion is hidden beneath miles and miles of BS lies and slogans designed exactly for the purpose of shutting the public and civil world completely out of the picture. That is not the American way and we all know it.

[anthonyshrubb]

04:57 PM on 10/26/2011

I don't find it a lie it is probably the truth because they where polling the rich which are the majority of stock holders are. You really don't think because hold mutual funds,ETF's and the like that your a shareholder,do you because i hate to burst that bubble.

[wmnorton]

12:59 PM on 10/26/2011

The American companies pay bloated salaries to their top executives, They set this up by having their buddies on the board and their buddies approve their saleries, then they sit on their buddies boards and approve their salaries. To see what they are really worth compare their saleries to comporable overseas companies, you will see that their pay is about ten times what it should be, in other words compared to the rest of the world the CEO getiing $20Million should only get $2Million

[vobox3343]

12:05 PM on 10/26/2011

Why would shareholders care? They're the ones benefitting from the trickle down when you legally, abeit, immorally find ways to con and bamboozle others out of their money.

[eyecon]

11:34 AM on 10/26/2011

The logic is so profoundly flawed that HP should be embarrassed to run this piece. How shareholders vote on annual proxies in NO WAY, WHATSOEVER, reflects investor sentiment. First of all the large institutional holders vote with management. Many, if not most, small shareholders don't bother to read the DEF-14A. They know that their proxy is irrelevant.

[KC Smith]

11:47 AM on 10/26/2011

So they are investing in a company, and they don't approve of its direction or decision, yet they dont pull their money out -- why?

[eyecon]

12:10 PM on 10/26/2011

If they think that they can get a decent rate of return they'd by shares in a health care company run by Dr. Mengele.

There was a study a few years ago. Small investors who make their own investment decisions buy stock for all the wrong reasons. You would be surprised at how many people own shares in companies because they like their commercials.

[brux]

01:14 PM on 10/26/2011

> that HP should be embarrasse­d to run this piece

HP does not seem to be very embarrassed about anything they run lately, this site has turned into a cesspool of nonsense.

[Charles W Noble]

11:22 AM on 10/26/2011

The vast majority of shareholders don't have the information to make the correct decision. Here is a simple solution: All publicly owned corporate employees making at the top 5% must FULLY disclose their compensation. There should be no loans to executives. They make good money, they have great credit, they should have no problem getting loans from a third party unaffiliated company. There should be no stock options to companies because they are hard to price. If they are compensated in stocks - give them the actual stocks not the options. The reality is that most shareholders simply don't know what their executives make. Once they find out, they will demand more action and are less likely to settle for bad results when someone is making $20 million a year!

[eyecon]

11:36 AM on 10/26/2011

They do, in the DEF-14A. The problems are:

1. It's not one shareholder - one vote. It's one share - one proxy vote.
2. The vast majority of small shareholders never bother to read the proxy materials.

[brux]

01:14 PM on 10/26/2011

Exactly.

[anthonyshrubb]

05:06 PM on 10/26/2011

Because there is no such thing as a small shareholder you might be a investor with a 100 shares but the big investor with 100000 shares is the true shareholder, your just a nuisance.Sorry to say.

[anonymous67]

11:17 AM on 10/26/2011

This article is a sensationalized piece of trash propaganda and a joke. The noted statistic is NOT even remotely meaningful for the conclusion draw by this reporter.

I hope the Huff Post editors are paying attention and this reporter truly regrets authoring a piece with so little integrity. This article is more appropriate to ET or Fox news.

[KC Smith]

11:14 AM on 10/26/2011

Logic and reason never work average people so here is my revised report: First I will brainwash thousands of very greedy shareholders into giving me lots of raises for no reason because they LIKE me and I'm not greedy then I'm going to take my fat salary and bonuses and stick it in my ears. I will then go out of my way to flaunt it in front of the poor, neglect my job, and never spend a minute worried about jobs, company earnings, or the people I love. Its all about the cash!

[KC Smith]

10:35 AM on 10/26/2011

You guys are mad because people with MAJORITY ownership (interest) in a company are APPROVING raises to their CEO? Seriously? Its there money, let them spend it how they please and if the other share holders don't approve they can SELL their stocks. Plus, what would you expect.. pay your CEO $34k a year and let a 19 year old kid run the company?

[ZappaRules]

10:43 AM on 10/26/2011

There are shareholders and yes, they can vote how they like. And then there are the STAKEholders and they - often we - who indeed have a stake in how a corporation like Goldman Sachs operates - becauseas it has been shown, directly impacts our lives.

And who is seriously saying these CEOs/executives should be compensated by 34K? They indeed are worth far more than that to their organizations. But when they lead their organizations off the edge of the cliff - when their leadership requires a tax-payer funded bailout to keep them afloat... Then OUR STAKEholder relationship just got a whole lot stronger - and in no way should these executives be being compensated at such totally OUTRAGEOUS rates. No individual at a firm is worth 200 / 300 / 400+ times the avg worker.
What are these executives doing now that they didn't do a couple decades ago that require they be compensated at such GREATER rates? Have not the avg worker increased his/her productivity greatly over the last couple/few decades? Why are they not seeing their compensation rise accordingly?!?!?

[KC Smith]

10:52 AM on 10/26/2011

Lets say we have a CEO that does indead lead the corporation over a cliff.. why would they approve the bonus or even keep them? Imagine if your corporation was in a huge bind and you knew that someone was going to have to spend every waking hour to fix it, and you expected to lose $500 million in assets. So you go out, and hire the best.. and at the end of the year he has gray hair and he made deals and put in measures and the company only lost $300 million. Is he not worth $3m in salery?

[KC Smith]

10:54 AM on 10/26/2011

Also have to remember who these people are.. the CEO is already wealthy, values his family and health more then anything, and there are only a few in the country that have both the social connections and abilities to do the job. They strain their marriage and take on huge stress to pull that company out of a bind -- and they already have plenty of money -- but they look at the problem and say 'I dont want 10,000 people to get cut' so they take the helm and work hard to make it better. The rich in this country work for the poor and that you guys will never understand until your at the top.

[muck-raker]

10:14 AM on 10/26/2011

TAIBBI: Moreover, the worse the economy got, the more being a millionaire or a billionaire somehow became a qualification for high office, as people flocked to voting booths to support politicians with names like Bloomberg and Rockefeller and Corzine, names that to voters symbolized success and expertise at a time when few people seemed to have answers. At last count, there were 245 millionaires in congress, including 66 in the Senate.

And we hate the rich? Come on. Success is the national religion, and almost everyone is a believer. Americans love winners. But that's just the problem. These guys on Wall Street are not winning – they're cheating. And as much as we love the self-made success story, we hate the cheater that much more.

In this country, we cheer for people who hit their own home runs – not shortcut-chasing juicers like Bonds and McGwire, Blankfein and Dimon.

That's why it's so obnoxious when people say the protesters are just sore losers who are jealous of these smart guys in suits who beat them at the game of life. This isn't disappointment at having lost. It's anger because those other guys didn't really win. And people now want the score overturned.

http://www.rollingstone.com/politics/blogs/taibblog/owss-beef-wall-street-isnt-winning-its-cheating-20111025

[muck-raker]

10:09 AM on 10/26/2011

It’s time to break up the big banks
Pushing to reinstate the Glass-Steagall Act would be a smart move for Obama both politically and economically
http://www.salon.com/2011/10/26/its_time_to_break_up_the_big_banks/

[ZappaRules]

10:02 AM on 10/26/2011

For 'direct' voting shareholders... I can see how this study comes to that result. (based on who votes on such matters and who own majority stock holdings)... But if a detailed report on the comparative rates of these executives was given and then a study of corporate STAKEholders was taken... I guarantee we would see that the vast majority don't believe these folks need any higher levels of compensation.

[ZappaRules]

09:56 AM on 10/26/2011

As a shareholder with certain entities... Every time I am prompted on this matter I vote against additional raises.
Just 2 decades or so ago, CEOs and executives made about 20 maybe 30 times the avg worker.
Today that rate is, at times, 200 to 300 times what the avg worker is compensated. (Sometimes much more).
Have not the avg workers become much more productive over that time? Why haven't their wages increased relative to those productivity gains? (And what productivity gains have executives shown?)

[KC Smith]

11:05 AM on 10/26/2011

Do you really think the average worker today works harder then the average 20 years ago? The only reason their productivity increased is because a CEO put technology and investment in place to make it happen. Instead of looking at the pay -- look at the way employees live now days. Our standard of living is thru the roof. Give CEOs what they ask for -- $3mm is peanuts -- you can make that a year playing around with small companies and not taking on the stress of a corporate 500.

[ZappaRules]

11:31 AM on 10/26/2011

Absolutely the avg worker works harder. Smarter / harder / etc. The ‘avg’ job now requires the individual to be much smarter – more capable – often both physically and mentally. (And here I still see executives that can barely operate a computer. That are incapable of doing most any of the supposed ‘low level’ tasks that those ‘on the floor’ do. As an example – look at how much knowledge and skill – and how many more tools an auto mechanic must now have to do their job. And are they compensated any better than they were years ago?)

The CEO put the technology in place -- and if they didn’t the company wouldn’t be able to compete. Such investment is a requirement of business.
The avg worker has had to put their own technology and make their OWN investments – taking their OWN savings – not company savings - to invest in themselves (Going to school more, training, tools, etc.)

[ZappaRules]

11:31 AM on 10/26/2011

Standard of living thru the roof… You mean like how so many folks (perhaps the vast majority) have major debt all so they can ‘own’… a decent vehicle, TV, cell phones? You mean like how so many families have to have both parents working just to get by? You mean like how so many folks are going thru life without healthcare coverage? You mean like how so many folks can no longer afford to send their kids to college?
(And then again - look at the EXTREME level of compensation the top are getting! They are so far removed from the reality of the majority.)

The massive gap between the Haves and the Have-nots is widening even more – even more rapidly.
The system as it is can not continue this way. It will self destruct.

Seriously… What reality are you seeing out there?

[ZappaRules]

09:52 AM on 10/26/2011

"Companies often determine CEO pay through a practice known peer benchmarking, which bases executive compensation not on the individual CEO's performance, but on what other companies are paying their CEOs"

Hey folks... Do you understand now why the corporations want to get rid of the unions and the like? Because they raise the level of compensation - and by doing so.... When workers then compare themselves to what is being paid elsewhere - JUST LIKE the corporations do for CEO/executive pay... They see that others are / can be paid a better rate.

So why should such a system work for CEOs/executives - but not for the average workers.

And are not the avg. workers the ones who have seen their productivity rise (pretty dramatically) over the last few years?
What productivity gains have CEOs/excutives shown?!?!?!

[KC Smith]

11:02 AM on 10/26/2011

Massive productivity gains -- they are fixing problems that 10 years of bad decisions have made. Its not their fault the company is in piss poor shape but they are taking the job to fix it, so they deserve a fair price for doing it. $3mm a year is peanuts.

[brux]

01:22 PM on 10/26/2011

Neuroscience shows the shortcomings of human valuation and the so-called free market which does not really exist. To ignore that for the sake of CEOs and the top 1% is a problem that until solved will haunt everyone in the world and drive millions into poverty and despair. We need at least some objective metrics to drive human effort and not all just greed, I think we have learned that greed does not work as the basis of civilization.