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Opinion | C.E.O. Pay, America’s Economic ‘Miracle’

Category: Editorial,Other

This all flows through a virtueless circle in which C.E.O. pay gets ratcheted up by boards of directors stocked with other C.E.O.s who can leverage the same reasoning to justify their own ballooning salaries. Among Disney’s directors is General Motors’s chief executive, Mary Barra, who earned nearly $22 million last year, or about 281 times the median salary of a G.M. employee — at least those who remained employed. In March, Ms. Barra idled more than 5,000 workers in Ohio and Michigan. There’s also Safra Catz, the co-chief executive of Oracle, who collected $108 million in compensation in 2018. (The other co-C.E.O., Mark Hurd, collected a similar amount; it’s only fair.) Might be a tad difficult for Ms. Catz to make the case that Mr. Iger is overpaid.

Measured by a market in which the S & P 500 index has tripled since 2009, every chief executive is a managerial genius. Never mind that last year the market was propped up by $806.4 billion in corporate stock buybacks that supported stock prices and thus C.E.O. pay by reducing the number of available shares. Consider, too, the source of the buyback money: a corporate tax cut, not increased profits created by superior management. In 2018, in fact, corporations spent more on buybacks than they did on capital expenditures. This year, buybacks are on another record pace.

Why wouldn’t chief executives propose more buybacks? They are a surer path to better pay than capital investments, which take a longer time to generate a return. Not necessarily better for the company but better for the bosses. The C.E.O.s got some extra gravy on their extra helpings, too. Thanks to the Trump tax cuts, their earnings were taxed at a lower rate, saving them hundreds of thousands of dollars; employees, on the other hand, saved only hundreds of dollars, or even less.

Top executives deserve to be rewarded for their leadership. And tying some of their pay to their company’s performance is reasonable. What’s not reasonable is leaving employees 1,000 miles behind their leaders under the assumption that he or she would bolt for something else.

Top talent may be scarce, but so are top jobs. Why don’t boards take the approach they use with their workers? Test the idea of paying less — would someone else work for half the pay and deliver 90 percent of the value of Oracle’s two $100 million co-bosses?

At the very least, boards need to link C.E.O. pay raises to employee pay raises, so that workers can share in some of the growth they’ve helped to create.


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