Help...I Think I'm a Communist!
>> 19 August 2009
In 2008, Oracle CEO Larry Ellison received $84,598,700 in compensation. Let me say that in bold: $84,598,700. That means that in the eyes of the board of directors, the work that Ellison does for the company is equivalent in value to the work of roughly 1,000 employees earning $85,000 a year. Consider the fact that the median pay for Oracle employees is almost certainly less than that and we are looking at closer to 1,200 people. If it came down to a decision between firing Larry Ellison, or firing 1,200 employees, the board of directors would have a really difficult decision. Both are equally valuable to the company!
Did you detect a hint of sarcasm in my typing?
Larry Ellison is among the highest paid CEOs in the world (he was the highest paid in 2007), and his yearly compensations aren't necessarily a good indicator of what most CEOs are earning. Nevertheless, the average yearly compensation for a CEO of an S&P 500 company is $10 million. Even if you're not making Larry Ellison money, that is still a lot of dough! An average worker with a college degree in the United states makes roughly $40,000 a year. For $10,000,000 - the price of one S&P 500 CEO - you could employ 250 average American workers.
I understand that CEOs are talented leaders, communicators, and so on and etc. I also understand that in a free market economy, people are compensated based on the market value of their work. But does anyone really believe that the fair market value of a CEO's labor is $10,000,000 a year? Honestly?
Consider this: the people on the board of directors for most major companies are - big surprise - OTHER CEOs! Of the eight members of the Oracle board of directors, four are CEOs, two are professors from Stanford (who receive $400,000 annually for being on the board), one attorney, and a multi-millionaire venture capitalist to round it out.
Test your cynicism by answering the following question: Why would CEOs on a board of directors approve an outrageous salary for another CEO?
We pay our president $400,000 a year. A Nobel laureate, someone who has made groundbreaking accomplishments for the benefit of humanity, $1.2 million per prize won. And, you know what? That sounds about right. CEO pay, on the other hand, sounds a lot like a scam.
Questions for Discussion:
- Am I a communist / insane?
- If you were throwing a party and could have 1,200 people come, or just Larry Ellison, who would you choose and why?
- Which musical artist with populist themes does this post make you think of? Bob Dylan? Bruce Springsteen? The Jonas Brothers?
2 comments:
No, you are not a communist! I am pretty conservative and I have always thought that CEO salaries are outrageous. Unfortunately it is all about power, position and the reality that salaries don't necessarily reflect the value of the job you do. I personally believe there is no job more important than teaching, yet teachers have historically been poorly compensated - largely because they were mostly women with no power or position. Teacher salaries are improving, but I still don't think they're paid what they're worth.
Not sure about the musician part of your question. I think I would actually vote for Crosby Stills Nash and Young or some other hippie group from the 70s. They sang gentle protest songs, but nothing likely to inspire revolution. Or maybe the Mamas and the Papas?
Agree, in outrage! It would be interesting to see how much of that was paid in cash vs. stock. It doesn't even make sense to me how that can get past a board review.
In short, it's ridiculous how much these CEO's get paid. I think they've all been watching a little too much of The Philanthropist and think they are all Teddy Risk.
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