C.E.O`S OVERPAID
I have always felt that the top executives of public companies earn far more than their real value to the company in which they are employed. But the cards are stacked in their favour. They have a great deal to say about the choice of who sits on their boards, and usually the people appointed are their friends. It goes without saying that board committees set the salaries.
A recent change in how executives are paid, has to do with stock-based pay, the realized gains from exercising stock options, and the vesting of stock awards to the company executives. At the inception of this system it seemed reasonable. Executives were given some shares so they would have an incentive to boost shareholder value. With the exercising of options and ever-rising stock awards many executives have been able to ratchet up their pay even when the share prices fall. In the last 20 years the American worker`s pay has been stable while the C.E.O.`s of these public companies increased by 400%
In 1992 the average total compensation of the 500 highest paid American executives was 8.9 million ( in 2012 dollars) of which 59% came from gains on stock options and 9% from fair value stock awards. In 2012 their average compensation was 30.3 million with 42 % from stock options and 41% from stock awards. In 2009 when the global banking industry was in deep financial trouble, and dozens of industrial countries were in recession, executive pay was almost twice the level of 15 years earlier.
The regulation that so favoured the public companies executives was the Securities and Exchange Commissions rule 10b-18 started in 1982, which essentially legalized stock manipulation by allowing companies to repurchase (buy back) their shares from the market, amounting to 25% of their average daily over the previous 4 weeks. This effectively pumped up the share price which was a bonus for the C.E.O`s but it might have left the company short of cash for bringing on the market new winning products and services, that would have benefitted shareholders and employees.
The AFL-CIO calculated that the ratio of CEO pay to workers went from 40-1 in 1980 to 300-1 in recent years. It seems executive greed has no boundaries and this is a legal deception where the workers do not benefit.
