CEO's vs. Average Joes (Part II)....
Tuesday, June 19, 2007 | Jason JovineRating:
Several months ago, I wrote an article entitled called CEOs vs. Average Joes which basically compared the pay that the top five CEOs were making to the pay that your Average Joe (Average American worker) was making. Well, folks, here is Part II! This is the updated version. No matter which side of the aisle you are on, you cannot argue with the evidence. The evidence is that the gap between the rich and the poor is growing. You may be one of those people who think that this is “no big deal”. Over the short term you may be correct, but over the long term, this is the stuff that leads to major problems in a republic.
You may think that it won’t affect you, so there is no need for you to be concerned, but I assure you that if this issue is not addressed, it will affect you or someone in your family sooner of later.
Let’s look at a couple of quotes first, shall we?
CIA (Central Intelligence Agency) fact book:
The onrush of technology largely explains the gradual development of a "two-tier labor market" in which those at the bottom lack the education and the professional/technical skills of those at the top and, more and more, fail to get comparable pay raises, health insurance coverage, and other benefits. Since 1975, practically all the gains in household income have gone to the top 20% of households.
Ben Bernanke (Chairman of the Fed):
“The compensation of chief executive officers of corporations is often singled out for particular scrutiny. Some economists have argued that the observed increases in CEO pay packages can largely be justified by economic factors such as changes in the relationship between the CEO and the firm that have led to shorter and less secure tenures for CEOs (Kaplan and Minton, 2006) and to a greater tendency to hire CEOs from outside the company (Murphy and Zabojnik, 2004). Others note that substantial increases in the size and scope of the largest corporations have raised the economic value of skilled corporate leadership (Gabaix and Landier, 2006). However, critics have responded that increases in CEO pay may have been amplified by poor corporate governance, including the substantial influence that some CEOs appear to have had over their own pay (Bebchuk and Fried, 2003.) This debate will no doubt continue.”
As you can see from the paragraph above, Ben Bernanke approaches this situation objectively. He offers reasons people cite to validate CEO pay as well as the counter. What I want to do is tell you, the Tycoon reader, what the “Average Joe” (average American citizen) makes and then tell you what the top five CEOs have made.
You could e-mail me and tell me what you think. Fair enough?
Average Joe
According to CIA (Central Intelligence Agency) GDP per capita (per person) is $43,500.
Now, let’s compare what the Joes make to what some CEOs make.
The Five Highest paid CEOs
(these figures are courtesy of www.forbes.com)
1. Steven P. Jobs
CEO of Apple (symbol: AAPL).
Total compensation: $646.60 million
5-year compensation total: $650.17 million.
14,864 times the Average Joe!
2. Ray R. Irani
CEO Occidental Petroleum (symbol: OXY)
Total compensation 321.64 million
5-year compensation total: $509.53 million
7,394 times the Average Joe!
3. Barry Diller
CEO of IAC/ Interactive Corp (symbol: IACI)
Total compensation: $295.14 million
5-year compensation total: $512.27million
6,784 times the Average Joe!
4. William P. Foley II
CEO of Fidelity National Finl (symbol: FNF)
Total compensation: $179.56 million
5-year total compensation: N/A
4,127 time the Average Joe!
5. Terry S. Semel
CEO of Yahoo (symbol: YHOO)
Total compensation: $174.2 million
5-year total compensation: $432.49 million
4,004 times the Average Joe!
These CEOs are obviously the highest paid CEOs, and, of course, not all CEOs make this much, but the conclusion that I want to drive home is that income inequality is getting much worse in this country.
I will end this article with a quote from the ancient Greek writer/historian Plutarch:
"An imbalance between rich and poor is the oldest and most fatal ailment of all republics."
Until the next time, folks, spend your hard-earned money wisely,
(Please let us know what you think about Jason Jovine's article.)
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Jason Jovine
Contributing Editor
The Tycoon Report
