Top 10 CEO Salaries
The salaries of top CEOs have always been a central issue since the economic boom of the 1980's. U.S. CEOs started to receive premium compensation packages with stock options, bonuses, and benefits totaling to 25 times the salary of the average worker. After a mild recession hit at the beginning of the 90's, the average salary of the labor force started to go down, but the trend apparently excluded CEO pay.
Today, the practice of lucrative CEO pay is a hot topic in the economic crisis, with company employees being laid off while salaries of top CEOs continue to increase. In fact, if you look at the top 10 CEO salaries today and compare with the top 10 CEO salaries ten years ago, you will find that the compensation packages have increased at the same stretch when real incomes came down.
CEO compensation has always been regarded as the large elephant in the room. While no one is contesting that excellent executives for multinational companies are hard to find, many believe that the compensation gap between the CEO and the average worker is not justified. After all, without the average worker, no company will ever succeed.
Since the market for excellent CEOs within the industry is very small, the prices to keep them vary wildly. That is why it is hard to measure the true worth of a CEO to a company, and if it is hard to measure their value, it will be hard to compensate them fairly. Many believe that it is easy for CEOs to increase the stock value of the company by knowing what accounting measure to use to his benefit. Yet, the question remains if the CEO brought real value to the company. Was he instrumental in changing the company culture? Is a CEO's leadership good enough to drive a company through tough economic times? These intangible qualities are hard to measure, making it hard to pin down if the salaries of top CEOs are fair or not.
Meanwhile, others suggest that CEOs and their decisions have a bigger role in the economy than any other position. Some believe that they have the power to create jobs and be instrumental in increasing the competitive edge of the U.S. economy against the world market. Since they lead companies that are considered as important institutions in the economy, their importance and value cannot be understated. This is the reason why people believe for the most part that CEO compensation is justified.
What Top Athletes And CEOs Have In Common
CEO salaries are based on performance. The question is, what is the measure that you will use to correctly judge the performance of a CEO. Athletes in major leagues are compensated based on hard numbers such as points scored, assists, and improvement of the team in the standings. Superstar athletes are also paid on a higher scale compared to role players since they are the name of the franchise. Superstar athletes are very limited in quantity, which is why teams go all out and pay the highest salary that they can.
These are the nuances of athletes’ pay that are in common with the salaries of top CEOs. Like athletes, there are key stats that you can measure to judge if the CEO is doing well. However, unlike athletes, these numbers may not be enough to justify their salaries. Like athletes, talented CEOs can lead a company into record profits, but unlike athletes, it is hard to know if a certain CEO is talented enough to earn the pay he is receiving. The distorted view of CEOs is the primary reason why CEO pay is always in question.
Salaries Of Top CEO Trends
The latest compensation trends for CEOs show that salary package is pegged to the performance of the company. In a study released last March 2008, CEOs of large companies within the Fortune 1000 have a median compensation package of $9.4 million for the year. Salaries of top CEOs in mid-sized companies have a compensation package totaling $4.7 million. The base salary of CEOs accounts for only 19% of their total salary package. Long term incentives in the form of equity are the largest part of CEO compensation packages. In addition, performance based pay has become a common trend, almost as common as stock options.
In this economic crisis, stockholders are the first people to be wary of executive compensation. Bonuses based on specific goals are more important for companies and their stockholders going forward, but in times where almost all stocks are going down, it is hard for CEOs to exert their influence and pull off impressive results.
Obama On The Salaries Of Top CEOs
President Obama issued new restrictions on CEO salaries for bailed out companies. The cap set by the White House is likely to be the standard for other companies. The move by Obama came at a time when the average salary for CEOs of bailed out companies was $13.5 million in 2008, a large value compared to the compensation package for the President of the United States capped at $500,000.
The new wave of frugality started by Obama could be the starting point for moves to reduce executive pay. There are companies who have reportedly waived severance packages and luxury perks in response to the clamor of stockholders.
The Top 10 CEO Salaries
For the year 2008, the highest compensation given to a CEO was approximately $26 million dollars to Robert J. Stevens of Lockheed Martin Corp. Stevens is followed by Martine A. Rothblatt of United Therapeutics Corp with $25 million. Malon Wilkus is third at $21.8 million. Nicholas D. Charaja of General Dynamics Corp got a total compensation of $18.5 million, followed by Richard D. Fairbank of Capital One Financial Corp ($17 million).
The two executives of the housing loan giants were 6th and 7th in the list. Richard F. Syron of Freddie Mac received $14.4 million, while Daniel H. Mudd of Fannie Mae got $14.2 million. To round up the top 10 are David Schaeffer of Cogent, Van B. Honeycutt of Computer Sciences Corp, and Ira J. Wagner of American Capital receiving compensation packages from $12 to $13 million.
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