Thursday, April 15, 2004

US CEO pay gap

This is an interesting article from CBS Marketwatch regarding the increasing gap between the pay of Company CEO's and the average worker. The source of the information is Business Week's 54th Annual Executive Compensation Survey.

According to the article:

". . . CEO's of 365 major companies surveyed earned an average $155,769 a week, vs. $517 a week for the average production worker, $301 for every dollar earned by average workers."

If that concerning, perhaps we should be more concerned that, according to the article, in 2002 the ratio was $282 to $1, meaning that there was about a 7% increase last year to this year, which is far ahead of the approximate 3% cost-of-living increase.

To give you an idea of the historical increase of CEO pay, from the article:

"If the minimum wage rose as much as CEO pay over that time, it would be $15.71 an hour today, more than triple its current rate of $5.15 an hour."

So is this ok? No, it's really not. The interesting thing is that CEO's and executives are the highest-paid people in a company, but when the company needs to eliminate positions or people to save money, it is always the lower level workers that get terminated. For example, a company would rather terminate 6 $30,000 per year positions than 1 $180,000 per year executive. There are always younger, motivated, bright people that are willing to take executive and CEO positions for far less than the current people are being paid now -- always!

The oversight for these ridiculously spiralling CEO salaries lives in the boardrooms, and apparently the board members see not issue with the salaries that CEO's and executives are being paid. This begs the question of whether or not boards actually do represent the best interests of the stockholders.

Remember the question Tom Peters asked:

"Did Moses have a secret eleventh commandment that said bosses have to be paid more than the people that work for them?"

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