Amidst bailouts to AIG, WAMU, and other corporate entities, there is always the fear that executives will be richly compensated as workers, stockholders, and now taxpayers foot the bill.  As GM and other automakers hover on the brink of bankruptcy, one concern in any bailout talk is that executives who made bad decisions will be rewarded.

We have precedent for this in recent history, as former president of Countrywide Bank Angelo Mozilo walked away with $45 million in pensions and retirement plus deferred compensation when Bank of America rescued the biggest player in the subprime mortgage game.  Bailout stories of other banks and corporations reveal similar going away gifts for top executives.

Aside from the headline-making golden parachute deals, CEO pay has risen drastically in a mere 35 years.  In 1975, CEOs made 45 times as much as the average worker.   By 1991, CEO pay was 140 times the average salary.  By 2004, it was 300 times as much.  This determination, made by pay expert Graef Crystat, assumed that the average worker made a salary in the low to mid 30s.  (The average worker salaries seem high, which only accentuates the dramatic gulf between workers and CEOs.)

The Wall Street Journal recently observed that three of the 25 high earning CEOs profiled were major players in the housing industry.  Dwight Schar, chairman of NVR, Inc., owner of Ryan Homes, made $625 million  in stock sales over the past five years.  Robert Toll, CEO of Toll Brothers, Inc, a major construction firm, along with his brother received $773 million in compensation and stock proceeds.  The chairman of the Ryland Group, R. Chad Dreir, cleaned up during the housing boom in Las Vegas and Ft. Myers, FL and earned $181 million.

At a time when companies are cutting their workforces, retracting benefits, and implementing numerous cost-cutting moves, it is ironic that CEOs are pulling down millions.  Even in the healthcare insurance industry, where yearly increase of 30-40% in employer premium costs are not uncommon, there are cases like United Healthcare President William McGuire, who made $124 million in 2004 or his more poorly paid competitor Jeffrey C. Barbakow at Tenet Healthcare who only made $116 million - slightly less than $23,000 an hour. How can one hour of work be more than many $11 an hour workers make in a year? 

The issue of CEO pay is bigger issue than we can tackle in a blog.  The point is, CEO pay has gotten out of hand.   CEOs, especially of large corporations, are seldom people who rose through the ranks and built the company with their sweat or their business acumen.  This pay escalation at the top is not capitalism at its finest.  Salaries and benefit packages need to be brought down into the stratosphere.

There needs to be cultural change surrounding the issue of executive pay.  If you ever wonder if cultural change can occur in the workplace, watch the TV show Mad Men.  In the 1960's world of advertising, women were treated like meat and executives had tumblers of bourbon on their desks.  Today, women are much more respected in the politically-correct world of work, while companies are hesitate to serve drinks at the annual holiday party.  Perhaps in a decade or two, out-of-control executive packages will be as out of date as three martini lunches.

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