America’s 5 most overpaid bosses
April 29, 2009 by Jim GiulianoPosted in: In this week's e-newsletter, Latest News & Views, Management, Money, Pay and benefits
We’re not sure what the point is of compiling this list, except to convince us that we’re worth at least every cent we make.
The list was put together by Forbes magazine, and matches the executive’s salary with company performance (or, rather, nonperformance):
- Kenneth D. Lewis, CEO of Bank of America
Tenure as chief: Eight years
Average annual company performance during that period: Lost 8%
Average annual salary during that period: $29.7 million - Jeffrey R. Immelt, CEO of General Electric
Tenure as chief: Eight years
Average annual company performance during that period: Lost 12%
Average annual salary during that period: $14.4 million - Ramani Ayer, CEO of Hartford Financial Services
Tenure as chief: 12 years
Average annual company performance during that period: Lost 8%
Average annual salary during that period: $13.5 million - James R. Tobin, CEO of Boston Scientific
Tenure as chief: 10 years
Average annual company performance during that period: Lost 7%
Average annual salary during that period: $8.5 million - Robert E. Rossiter, CEO of Lear Corp.
Tenure as chief: Nine years
Average annual company performance during that period: Lost 29%
Average annual salary during that period: $5.5 million
Tags: Bank of America, Boston Scientific, Forbes, General Electric, Hartford Financial, Lear
May 4th, 2009 at 8:25 am
Yikes! I guess it pays to have a contract when you are at that level. You get your monies no matter what!
May 4th, 2009 at 10:01 am
What is wrong with this picture! I mean where is the control? All of these companies are showing losses an look at the salary they receive! What do the share holders have to say about the numbers? My feelings are when you are at that level, your salary should be adjusted to the companies profit and loss statements. If you are showing a loss of 8% then the CEO should receive an 8% reduction.
May 4th, 2009 at 12:22 pm
It is the middle class American people who let this happen and only they can change it…..Perhaps they will when they get enough of the bs.
May 4th, 2009 at 12:27 pm
Note the highest paid was BOA CEO. Bailout money to pay him!!!!! We are in the construction industry and they have literally squeezed us to death. New rules at a whim on construction loans, etc…It is hard to keep employees motivated and hopefull when they hear of this kind of crap and quite frankly it is hard for me to swallow as well. I don’t know how much longer we can last.
May 4th, 2009 at 1:14 pm
Instead of Bank of America raising rates on good customers why not lose the top heavy people!!! It is sad that they are forcing their good customers to take the brunt of the loss when they are still getting 100 times more than they are worth. I can’t believe these people can live with themselves knowing that the customers who made them who they are now are being forced with higher rates, lower limits and higher monthly payments. The board of directors ,which should be the American people, should demand their resignation.
May 4th, 2009 at 1:33 pm
How do we know that they didn’t (or are about to ) receive a reduction in their current wages based on the business decline? Most high level executive compensation has a tie to profits or margins and if it doesn’t….the board didn’t do their job.
May 4th, 2009 at 1:35 pm
Melony, while I certainly understand your point, keep in mind that if CEO pay is based on the performance of the company, the incidence of fraud tends to go up. Not everyone is unethical, by no means, but there are a lot of people out there who would see an opportunity to make more money or to not have their pay reduced by making it appear that the company is doing better than it really is. It is a very common fraud. I don’t think it is right for these CEO’s to make this much money when lower level employees are losing their jobs and the companies are taking bailout money, but I also don’t think basing compensation solely on performance is the way to go.
May 4th, 2009 at 2:13 pm
“…..but I also don’t think basing compensation solely on performance is the way to go.”
Yeah, the ceo would be putting back into the company rather than getting paid at this point.
How funny!
May 4th, 2009 at 7:17 pm
All these companies are losing money. All these CEOs are making millions. All these companies are receiving millions in taxpayer bailouts. What a sweet deal if you are a CEO.
May 5th, 2009 at 12:16 pm
So often we are only told exectuives’ base pay — but they often receive multiples more worth in stock options and perks that you and I rarely hear about… and, for them, the plus side is that if they hold stock for a year pay even LESS tax (capitol gains tax, in 2010 will be 20%) than they would have if they would’ve received straight pay (~35%). For instance, a CEO may make a base pay rate of 2million with 10million in stocks, perks, pension, etc. No, it’s not an exaggeration. It is common practice.
Executives should receive “vested” bonuses of stock options that will mature to 100% in 5 to 10 years. THIS WAY, they will plan for LONG TERM success of a company.
Lauren above stated that if it was performance-based pay then CEOs would commit more fraud. Lauren, this is already happening due to stock options: CEOs receive millions in stock, they hang on to it for a year, then want to cash it out, but before they do, they want to give the impression the company is very valuable. So, in some cases, the quickest way to falsify profits is to lay off thousands of workers — this gives the impression of increased profits because you are saving money in the very short-term. Execs do not care, they just want to get the stock price up by showing increased profit, so that they themselves can cash out. They do not care that they are cutting off a company’s long-term survivable assets (people) because the remaining people will work much harder (in the short term) to compensate due to fear of also losing their jobs. Moreover, the execs often do not remain with a company for >5 years anyways.
Meanwhile, they cut the company to death; cutting off research and development (R&D), engineering, etc. They just keep the financial arms alive as long as needed so they can keep the money flowing on the existing products/services.
General Motors (GM) is a prime example.
Rick Wagoner cut cut cut people to make profits SEEM like they were not so bad. As GM lost profits at an increasing rate to the amount of $82 BILLION over his last 4 years, we consider if his pay deserved his performance:
2005=8.5million
2006=14million (ex. 2.2million base pay, 8.3 stock and perks)
2007=24million (ex. 1.6million base pay)
2008=(ex. 2.2million base pay)
2009=(estimated possible 15million in severance pay (~22million including retirement pay))
.. from: http://www.gm.com/corporate/investor_information/docs/stockholder_info/Proxy_Statement2008.pdf
GM used to be innovative. They barely care about R&D anymore, rather they keep producing mediocre products that cannot compete against our foreign competitors, preferring instead to let the Asians and Germans make something first than do the simple task of reverse engineering… unfortunately it takes GM almost 5 years to catch up to any technology/trend, so by the time they hit the market it is old news or old technology.
May 6th, 2009 at 6:28 pm
There are two changes that will have to occur to fix this issue, and until it is fixed, we might as well give up on the idea of turning American business around.
First, we need to place a cap on the deductibility of executive income. Nobody wants to see the government setting pay scales (other than the minimum wage) but there is no reason why the rest of the country should subsidize exorbitant salaries, bonuses and perqs with tax deductions. Right now a big incentive for the payment of exec bonuses is the reduction of taxable corporate income. We need a tax code that encourages a strong middle class now; we have enough billionaires. We can find a way to rework the tax code to discourage this kind of executive looting and encourage a more even distribution, or reinvestment, of profits – either a simple cap on the deduction for any individual’s total compensation, or a cap that is tied to the average or minimum wage paid to workers. Every third world country has a wealthy elite; a healthy country needs a strong middle class. A strong middle class buys houses, cars, and appliances, keeping more people working to build those commodities, and is less likely to need government assistance. A culture with an isolated and protected elite and a poor labor class will eventually have a higher crime rate and less funding for infrastructure and defense.
Second, we need to protect shareholder rights by placing limits on the Business Judgment Rule. As a shareholder, you have no right to stop the looting of your assets by your own executives or Directors. The Business Judgment Rule prevents courts from second-guessing the business decisions of exes or directors, even in decisions related to setting their own compensation. The law does not protect corporations, it protects the individuals at the top. As we have seen all too much lately, a company can be spent into bankruptcy, but the highly-paid individuals who made the decisions have no liability. The way the laws are currently written encourages the kind of predatory executive culture that is prevalent today. Too many have become a type of locust – they move into the top of a company, tweak the numbers for short-term top-level pay, and retire with a golden parachute or move to the next ripe field. They make enough money in the short term that the long-term health of the company doesn’t even matter to them. If we are ever going to prevent the kind of market losses we’ve seen, we have to protect the interests of investors from the people who have their hands in the cookie jar.