Exxon Mobil Corp.’s former chief executive Lee R. Raymond received more than $400 million in total compensation in 2005, his final year, The New York Times reported — and his total compensation during his 13 years amounts to $144,573 for each day he worked.
Not bad, eh? But he’s hardly alone in cashing in. While the average American worker has seen wages and benefits decline because of outsourcing and technology, executive pay “continues to rise at an astonishing rate,” according to a recent Times special report, which found that the average pay for CEOs increased a whopping 27 percent in 2005, to $11.3 million.
Granted, Raymond led a company experiencing record — many would say obscene — profits. But the oil company’s recent performance is tied as much to the luck of commodity prices as to his leadership.
As one compensation analyst told the Times, “Exxon was there long before Mr. Raymond was there and will be there long after he leaves. Yet he received Rockefeller returns without taking the Rockefeller risk.”
When will corporate boards and shareholders say “Enough”?
Posted by Randy Scholfield
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30 Comments
Shareholders will say “enough” when they are tired of their returns being squeezed by executive payroll. But so many executives receive creative compensation packages like options, it’s sometimes difficult to adequately quantify the actual payroll costs to the company.
The issue of athlete’s salary is very similar. Is Peyton Manning worth $7 million? Depends on how much of a football or Colts fan you are, but it’s still hard to justify that kind of money. But that’s what the market pays. Now is the chance for our resident free-market-at-all-costs crowd to defend this craziness.
Boardmembers/officers tend to serve on each others Boards so they end up voting for ach others’ salaries/bonuses.
One has an easier time justifying an athlete’s salary because his performance is eyeballed and rated almost minute by minute. His salary is truly based on performance…one might take issue with the absolute level of his compensation, butthat’s another story.
Very few executives are scrutinized for their performance the way an athlete is. Further, one would have ahard time making the case that any improvement in corporate performance was solely or almost exclusively due to their contributions. Even if one were to make that case, there are psychological factors at work that any psychologist who studies business organizations can tell you work to de-motivate workers…one of the big ones is stagnant/declining salaries in the face of record corporate profits or record executive compensation.
Any smart executive would realize that by sharing the pie he/she gets less now, but over the long haul will get far more from the increased respect, trust, and work of those he/she treated fairly.
At least the athlete has to be among the best in his field. An executive just has to be connected.Like Bush, he would never have gotten the deep discount on his baseball team purchase without being the president’s son.As far as outsourcing, it’s not “Good for America”, but it’s “Good for American execs.” You don’t see the exec’s jobs being outsourced unless the entire company is sold, and then they reap a bonanza.
I read Night Ridders profits are down over 50%, beware the cost cutting sure to follow!
You could also say one athlete is just one member of a team. Someone has to catch Peyton’s passes. He has to have someone to hand off to on running plays. The defense must show up. Peyton doesn’t kick field goals. Brett Favre was a tremendous athlete on a sucky team. Michael Vick would win a Super Bowl with a great supporting cast. Why are these guys paid so much when it takes more than one guy to win a Super Bowl?
Why are execs paid so much when it takes more than one guy to generate record profits?
OBSCENE sums both up very nicely.
America has to eventually set price caps in a lot of things.
Make illegal any salary over $100 Million in a year, no matter what the job is.
The problem, that cash is made of the backs some of the poorest people contractually. Gasoline and its taxes hurts everyone, especially those who can’t afford it.
Those forces won’t willingly allow America to use less oil because its so profitable. Its finding more and more places to drill for them, when society the world over is asking for a better way.
Its the test of humanity to not use oil so much that its harming the planet. Someone must force things to change. Tell the auto manufacutures, no more. No more car as they currently exist by 2016.
Every auto manufacture in the world has to shut down and come up with new technology. The governments have creat distribution of different fuels like hydrogen same as gasoline stations.
If oil companies lobby to stop this process or conspire with auto manufactures, they should be shut down.
There should be no “business” that dictates life on this planet so they can make a profit.
—–
Interesting how congress refused to put the oil execs under the gun when they had a chance.
As kfg said, NO MORE INCUMBANTS!!!!
If an athlete,such as Peyton Manning, were paid, say $150,000/year, then the BIG bucks would likely end up in the CEO’s hands – not that they don’t do quite well already.
Sports figures draw people to the events. If an NBA team sucks, but the fans know that Michael Jordan is coming in to play their team, the attendance goes up just to see the other team’s player.
The Exxon CEO’s $400 mill is very obscene.
Mrage – where are you going to get the hydrogen?
Ben,
It has to be created. The process right now is considering a fuel cell for the energy in a car instead of using gasoline.
http://www.eere.energy.gov/hydrogenandfuelcells/
Yes, it has to be “created” – and that will take energy. I have a scenario for getting that energy based on nuclear. I’m just wondering what yours is.
I must be gettng old. I remember when being worth $100 million meant you were really rich.
Do tell, nuclear? Using nuclear power to generate hydrogen? Some want to use trash, bio-matter could possibly work. Save our dump process that way.
I’m more, lets end the oil mafia sooner than later by any means necessary.
My concern there is still plenty of land left in the world to concrete for roads and today’s gasoline cars could quadruple in those Billions of people countries.
There has to be a better way for automobiles. I’m not tech enough to truly understand how it would work in cars.
Creating and distrubtion hydrogen won’t be that easy but some process can be done by individuals at home. People could have a hydrogen maker in their house.
It would be a very different process how we would use thoseauto’s with fuel cells.
a hydrogen maker? And plug it in and pay Westar?
I’m no hydrogen technology expert clearly, but its a power generating process and it wouldn’t be plugged in a socket.
I’m sure the technology once designed for auto’s will have application to power homes. An energy generating fuel cell instead of electricity.
I have no idea, but scientists are working on the technology.
Something has to be forced in this process and thats the government getting industry off of the oil bottle.
Can our government ever act in our best interest or will it stay under control of the oil mafia.
The Pentagon is complaining about cost of oil and fuel fighting wars.
Sounds like Westar Energy’s former bosses, Wittig and Lake. Together they were trashing our Kansas electric utility. Without any help from Westar’s Board of Directors, individual stockholders had very little power to rein them in except to complain on Westar’s stock message board. But after some five years of complaining, the Federal justice system began to pay attention. So now Mr. Wittig and Mr. Lake have new addresses: Federal Prison. Maybe this will happen to Exxon’s former chief executive, Lee Raymond. He can’t be clean with that kind of salary.
Jack Welch, former General Electric chairman, made $900 Million in less than a decade and still had perks, GE paying for his New York apartment, use of its corporate jet, still stock active and on call if ever GE needs some advice.
Its them who justify market value of their job and the salary isn’t really what their value is to a company.
He walked away with no charges filed except his x-wife asking for divorce because he was having an affair.
That’s the only way in the divorce paperwork, his pay amounts came out. GE wasn’t going to report publicly.
CEO salaries really aren’t market driven. Think how many hundreds of thousands of people who could replace any CEO, for a fraction of the going rate.
Dang, I’m in the wrong business. Maybe I should change careers!!!;)
Mrage, the problem with capping salaries is that it comes awfully darn close to communism. These guys are making what they make because someone is willing to pay them that. The US has implemented price controls on some things but I don’t believe they have done this on salaries of individuals in the private sector (does anyone know better?). For the government to step in like how you are saying, I think you’d have to show a compelling argument that these obscene salaries have a direct detrimental affect to society in general or especially to a protected class.
I hear ya, oil companies have WAY too much power, but nothing will tip the scales in our favor until people with gas-guzzling SUVs as daily drivers wake up and stop giving these companies exactly what they want. Ditch the damn Hummer and buy a Toyota instead. Hell, ditch the Toyota and take mass transit (unless you live in Wichita). Ultimately, WE have power over the oil companies but either we don’t know it, refuse to exploit it, or are too lazy to care.
Mr. Raymond’s comp is peanuts. The Wall Stree Journal reported today that UnitedHealth’s CEO, Dr. McGuire, has cashed in nearly $500 mil in stock options and has $1.5 bil in unexercised options. He’s richer than any non-founding-principal CEO in history. GE’s Jack Welch never made anything close to this, nor has Mr. Raymond. Allegedly, some health insurance cos. have been raising premiums beyond the increased cost of actual medical care. Some employers have been forced to foist increasing healthcare plan costs on ordinary workers: high deductibles, higher copays, ets.
Being a healthcare insurance co CEO. Now THAT’s nice work if you can get it.
“Allegedly, some health insurance cos. have been raising premiums beyond the increased cost of actual medical care. Some employers have been forced to foist increasing healthcare plan costs on ordinary workers: high deductibles, higher copays, ets.”
There’s the compelling argument that these obscene salaries have a direct detrimental affect to society in general or a protected class. A crafty, ballsy lawyer might have fun with that.
Limit salaries its not on everyone, its only on those making $100 Million dollars.More money dispersed in a corporation from the top would help flow down to the lowest economic worker. Workers would make more and executives less.
$100 Million isn’t chump change. I’m not even demanding its tied to dividend pay. The base salary can’t be over $100 Million in a corporation.
Dividends should be taxed for those people.
When companies take worker pay and place it in 401k plans, then the mutual fund company has to buy stock from a corporation overpaying executives who don’t balance their books, it harms too many people that are powerless to stop anything.
The government can help stop the madness in stock corporations, limit the pay of the executives. Because some of them are too greedy.
Private companies can set their pay scale however they want. There is more risk on the key individuals in those companies. All the risk is on investors in stock companies.
Corporations are exploding same time executives are selling stock cashing out and after they have collected hundreds of Millions in pay. Also borrowed from the Corporation.
The government has to stop those processes. Some of the corporations are only failing becuase of executive greed. Without limits this is happening.
The man increased the value of Exxon by about 150 billion dollars. 400 million doesnt seem so extreme when you keep that in mind.
I should have known that basic economics was beyond most people in this little echo chamber.
Heckler,
So I guess Kary Mullis, the discoverer of the polymerase chain reaction, the most cited, licensed, used patent in human history…worth literally hundreds of billions of dollars, should have seen aor saw a chunk of that money, huh?
Unfortunately, no he didn’t. His contract assigned the rights to his company. He got about $10,000 for being awarded the patent and a boot out the door a few years later. His management, however, now their compensation was a different story….
It’s not just the guy(s) at the top who contribute, sometimes substantially, to the bottom line. If you’re going to take that attitude with a CEO, then every lonely scientist or engineer whose work or patents turn a substantial profit for their company should also be in the money..just like all the execs are…It doesn’t work that way.
Fortunately, for Mr. Mullis, he received a Nobel prize for the work (and the attendant cash award). Sows you the breathtaking originality of what he did. Unfortunately, not everyone can bank on receiving a Nobel prize for groundbreaking work.
A smart executive will take a good compensation and use the rest to reward his team..builds trust, confidence, teamwork, and a sense of getting a fair shake.
Brian
If Kary Mullis had been working in his own lab, putting his own money at risk to develop his discovery and had patented his discovery he could have rewarded himself handsomely.
I assume he was working for someone else, using their facilities and putting their money at risk. He should have demanded a contract for a piece of the action as a condition of his employment.
Mr. Raymond had a contract with incentive clauses as a condition of his employment. His reward was not arbitrary.
Heckler,
Be realistic. The only people who have any possibility of “negotiating” their employment contracts are senior executives. In spite of that, and in spite of the fact that he was using the company’s facilities, the idea came from HIM. If I make the company $1,000,000,000 from my discovery, are you honestly claiming that $10,000 for me and $40,000,000 for the guy who put up the building is fair? Buildings, physical plant, equipment, are not the sources of ideas or discoveries. Any smart executive realizes where his bread is buttered and does his best to reward the innovative spirit and results of his staff.
Brian
I agree that it is smart business to reward employees well.
But what is “fair” and who determines what is “fair”? I certainly don’t want government to be the arbiter of who should make how much money.
Heckler,
Yes, on that we agree. I’m just commenting on the fact that Mr. Raymond’s employees are probably looking at their miniscule raises, layoffs, etc., and making decisions about their value to the company, how hard they’ll work, what they will and won’t reveal in the course of their work, etc.
Management is more about psychology and leadership than it is about “management”.