Skip to main content

Executive Millions in Salaries Raise Eyebrows

Especially When Pay Doesn't Match Performance

NEW YORK, MAY 14, 2006 (Zenit) - High levels of executive pay are making headlines again. It's the time of year when companies in the United States have to file information about what they pay their chief executive officers (CEOs) -- and critics are questioning the amounts.

Eyebrows rose when it was revealed that Lee Raymond, who retired last December after 13 years as chairman and chief executive of oil giant Exxon, received $686 million in compensation from 1993 to 2005. During this period the company's market value increased fourfold and income soared to record levels, the New York Times noted April 15.

More than $400 million of Raymond's benefits came in his last year with Exxon. The sum included his pension benefits, which he opted to receive in a lump sum of $98.4 million. Other oil company executives are being paid handsomely. Ray Irani, CEO of Occidental Petroleum, received around $63 million last year.

Alan Murray, in his April 19 column for the Wall Street Journal, defended Exxon's retired CEO. "Shareholders, by and large, got their money's worth from Mr. Raymond's tough-minded leadership," he wrote. Exxon even outperformed other big oil companies.

Still, Murray acknowledged that many felt outrage at the idea that someone in Raymond's position can earn more in a day that others earn in a year.

But the real problem, Murray contended in his April 26 column, is with the underperforming executives who also receive princely salaries. He cited the case of Hank McKinnell, chief executive of the drug company Pfizer. Over the last five years shares have dropped 40% in value, yet McKinnell received $79 million in that period. Plus he has a guaranteed pension worth $6 million a year for life.

Nor is McKinnell alone. Reuters reported March 31 on a study showing that CEOs at 11 large U.S. companies were paid a total of $865 million over the past two years, while presiding over a collective loss of $640 billion in the value of their firms' shares. Among the 11 companies cited as having the widest gap between CEO pay and performance were Lucent Technologies, Home Depot, Hewlett-Packard and Wal-Mart Stores.

Big pay, falling value

The CEO study published by the organization Corporate Library said: "Far too much compensation is delivered without any link to performance at all, with executives showered with golden hellos, golden goodbyes, tax payments and perquisites before during and after their employment."

A special report on executive pay published by the New York Times on April 9 mentioned the case of ConAgra Foods. Bruce Rohde retired as its chairman and chief executive last September. During his eight years in charge he received more than $45 million, plus a retirement package estimated at $20 million.

These rewards came in spite of the company missing earnings targets, and performing worse than its peers. Its share price fell 28% and more than 9,000 company jobs were cut during Rohde's tenure.

According to the New York Times, average CEO pay increased 27% in 2005, to $11.3 million. The information is based on a survey of 200 large companies. The average wage-earner, by comparison, took home $43,480 in 2004, according to U.S. Commerce Department data.

The gap between top executives and workers continues to grow. A CEO salary at a big company stood to gain more than 170 times the average worker's earnings in 2004. This compares with a multiple of 68 in 1940. The change came in recent years, when executive salaries started to accelerate in the 1980s.

The Wall Street Journal also published an in-depth look at executive pay, on April 10. Its figures, based on a survey of 350 major companies, showed compensation for CEOs growing 15.8% in 2005, to a median of just over $6 million. This amount covers salaries and bonuses, plus stock sales.

The survey noted that companies are reacting to complaints about high executive salaries. Delphi Corporation, which is in bankruptcy, had proposed setting aside $500 million in benefits for some 600 executives. The sum was reduced after pressure from unions and creditors.

Similarly, John Mack, CEO of investment bank Morgan Stanley, backed down amid widespread protests and had to give up a deal that guaranteed him $25 million for 2005 and 2006 if average CEO pay at Wall Street rivals reached a certain level.

But questions remain. Among them is the case of Gillette CEO James Kilts, who was set to receive a package estimated at $185 million after the company was taken over by Procter & Gamble.

Shareholder activists are proposing measures at company annual general meetings that put pressure on companies to limit salaries and to disclose more information about executives' benefits, the Washington Post reported April 28.

A ...

1 | 2  Next Page

Rate This Article

Very Helpful Somewhat Helpful Not Helpful at All

Yes, I am Interested No, I am not Interested

Rate Article


Leave a Comment

Comments submitted must be civil, remain on-topic and not violate any laws including copyright. We reserve the right to delete any comments which are abusive, inappropriate or not constructive to the discussion.

Though we invite robust discussion, we reserve the right to not publish any comment which denigrates the human person, undermines marriage and the family, or advocates for positions which openly oppose the teaching of the Catholic Church.

This is a supervised forum and the Editors of Catholic Online retain the right to direct it.

We also reserve the right to block any commenter for repeated violations. Your email address is required to post, but it will not be published on the site.

We ask that you NOT post your comment more than once. Catholic Online is growing and our ability to review all comments sometimes results in a delay in their publication.

Send me important information from Catholic Online and it's partners. See Sample

Post Comment

Newsletter Sign Up

Daily Readings

Reading 1, Leviticus 25:1, 8-17
Yahweh spoke to Moses on Mount Sinai and said: Read More

Psalm, Psalms 67:2-3, 5, 7-8
Then the earth will acknowledge your ways, and all nations your ... Read More

Gospel, Matthew 14:1-12
At that time Herod the tetrarch heard about the reputation of ... Read More

Saint of the Day

August 1 Saint of the Day

St. Alphonsus Marie Liguori
August 1: Bishop, Doctor of the Church, and the founder of the ... Read More