Obesity Epidemic Among CEO Pay

It's like that scene from Morgan Spurlock's Supersize Me. You known, when he throws up because his digestive system just can't take another Big Mac.

That appears to be what's happening among the nation's CEOs.

They are puking up the super fat paychecks they've gotten over the years.

The most recent example is Stanley O'Neal who is leaving Merrill Lynch after giving it a big fat gift of a $8 billion dollar write-off thanks to risky investments.

The board just can't help but feed this obesity epidemic.

They're giving him $160 million plus in severance for his troubles as he heads for the door.

At some point, the nation's corporations, or most pointedly, their corporate boards, will realize throwing money at their CEOs is probably not the best idea. One study shows that CEOs with lots of cash to build megamansions don't do well by the company's they control.

David Yermack, a finance professor at New York University, actually looked at executives who build megamasions and found that those who do oversee companies that underperform the market.

Why? A Wall Street Journal article stated that the researchers "theorize that some of these executives might be focused more on enjoying their wealth and less on working hard."

We don't know for sure what unbelieveable wealth does to these leaders. Maybe we need a bit more research on the topic.

Unfortunately, the wealth obesity epidemic is spreading. Now we have other institutions thinking they should be following big businesses' lead and pony up big bucks for their head honchos.

Now public pension funds, the funds that many of the nation's state and local workers rely on for their long-term benefits, want to get in on the fat paycheck act. These funds, according to the Wall Street Journal this week, are considering paying their top dogs big money so they'll continue to bow wow wow.

But this time it won't be shareholders who end up holding the bag if these funds go belly up. Taxpayers will end up bailing them out, or state and local workers will end up in the poor house, at least in a worse house since basic retirement benefits will be in jeopardy.

I asked one finance professor about the trend to give public pension fund leaders big money, and he says it's not a great idea.

"Public pension plans are not likely to replace their investment staff when their investment performance suffers," says Stephen D'Arcy, professor of finance at the College of Business, University of Illinois. "Thus, if public pension fund investment managers gain the high pay of industry, they will likely have both the high pay and job security, which means the public plan would be overpaying for talent."

He opposes opening up a plan's check book and giving the leadership staff a ticket to Kobe beef nirvana.

At a time when the chasm between rich and poor is only getting bigger and bigger, and Americans seem to be getting fatter and fatter, it might be the right moment in our history to put CEOs on a diet.

Comments

[nomoredead]

Let them get that kind of pay but then lets let the common worker get his fair share...say $50 per hour to start and on up. rrriiiiiiiiigggghhht

[NABNYC]

It all goes back to corruption in our government. If our politicians weren't on the take, spending more time hauling away bribes than actually doing anything for the country, this problem could be quickly solved.

The tax laws are the answer. All income above $250,000 taxed at 70%, and everything above $500,000 taxed at 90%. When people are just going to pay their excess earnings in taxes, they have less incentive to be so greedy. Reduced taxes create more greed.

Second, the tax laws should prohibit a business from writing off any consideration in excess of $250,000. This includes not only the CEO's pay, but also their benefits, pension, and the current value of any stock options. If the business cannot write it off it by definition becomes waste, and therefore illegal.

The reason the politicians don't do this is because they like all the bribes that are paid to them by the CEOs. And when they leave politics, they want to go work for some company and get paid millions of dollars for doing nothing.

[BRUMALIA]

Placing CEOs on a remuneration diet is a must.These gaudy levels of income are outrageous and unbelievable.

[pompous]

We had a debate once in my economics class regarding CEO pay. Some believed that CEO pay was deserving in the sense that you get what you pay for. I disagree. I think many times we pay too much for too little. You mentioned O'Neal as just one example. Nardelli is another example of paying too much for to little. Now he is out to work his magic on Chrysler. A CEO should be treated like any other company employee. Unfortunately many of these CEOs all go to the same schools to get the same education cut, cut, cut labor costs while of course preserving their own position.

[ihavenobias]

"¦In 1965, U.S. CEOs in major companies earned 24 times more than an average worker. In 2005, the average CEO in the United States earned 262 times the pay of the average worker¦"

informationweek.com/story/showArticle.jhtml?articleID=189600723

I"d buy that, like in the 60"s, a CEO is worth *24 times* more, he is NOT worth 262 times more. What has changed in the last 40 years that would lead one to say that think this exponential increase in pay disparity is justified?

Are the CEO"s of today over 1,000% more productive and creative than the CEO"s of the 60"s? Is today"s top brass a result of a secret experiment in genetic engineering, allowing them to outperform the average joe by an insane margin?

I don"t think so. Yes, they deserve to get paid more due to (usually but not always) hard work and a hard earned education and skill set. But we should have a discussion as a nation as to "how much is too much", something that hasn"t been done in the last 30 years or so apparently.

I'm not advocating a wage cap, but a ratio/cap at least makes for an interesting discussion if nothing else.

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