CEO Pay run Amok

In today’s Wall Street Journal, Carol Hymowitz reports that the growing pay gap between CEOs and average workers is “fuel[ing] worker woes.”  It got me to thinking about the claim.

She reports the gap has roughly doubled since 1994 to 180 times – the multiplier for the difference between the CEO and an average worker wage.  With the average CEO salary about $8.8 million, the average worker wage is just short of $50,000. 

It is hard to argue that such a disparity might be dispiriting to workers.  Further the incredible golden parachutes awarded to deposed CEO’s [that is, ones who have been chief of a losing company] is disconcerting if not sickening.  The unfairness of a failing company rewarding its departing CEO with such largesse (millions of dollars in some cases) while laying off workers living from pay check to pay check is obvious.

But is morale really a function of the CEO pay?  I did a quick check of some NBA salaries to see what kind of disparity they work under.  Take the Boston Celtics who had the best record in the NBA this year and are favorites to win the title.  The highest paid player on the team is Kevin Garnett who makes $23,750,000 this season.  I compared him to the lowest paid contributing member to this excellent team—Glen Davis who made $427K as a rookie this year.  This is a differential of 55 times between peers who must work together as a team!

This kind of pay gap is not unusual; the Denver Nuggets highest paid player make just over $20 million and a frequent starter (Linas Kleiza) makes about $1,000,000. One of the points of the article is that the ones affected by the high CEO salary is the rest of the executive team.  General Electric CEO Jeffrey Immelt is quoted in the article, “Should the CEO make five times, three times or twice what this group [Executive Team] makes? That’s debatable, but 20 times is lunacy.”  Well the best team in the NBA has a gap of 55.  Next time I will explore further the common assumption on high executive pay.  

My apologies for the month "sabbatical" from blogging.  I want to write just a bit about my 2 1/2 year old son Paul (the picture is him about a year ago).  At the end of February he had surgery to remove a swollen lymph node on his right jaw; about 10 days ago we finally got a diagnosis from that biopsy.  The very good news is that Paul does not have any cancer.  He has a a bacterial organism called MAC.  This is a slow growing thing, thus the time from surgery to diagnosis.  The bacterium is nearly ubiquitous in our environment -- dirt, dust, etc.--and most people are able to handle it.  In a small number of cases an otherwise healthy child gets an infected lymph node from the bacterium.  Although related in some way to the TB bacterium, MAC is not contagious in any way.  

This bacterium is mostly localized and the way to get rid of it is to cut the skin. Based on our latest visit to a doctor at Children's Mercy, Paul will likely need another surgery to get rid of this. In the meantime he will be taking some anti-biotics.  You can imagine this has caused some stress for our family -- though not too much because Paul is pretty healthy otherwise.  We are very thankful that this is curable even as we must be patient for it to heal.

It is amazing how little control we have over things like health.  The doctor said that this was probably just "bad luck."  I know there are many, many other families dealing with much tougher circumstances and in many cases are the victim of bad luck, too.  Not unlike managers who must depend on getting results from others they have no control over . . . oh by the grace of God . . .