Thursday, July 29, 2004

CEO pay rising at an extraordinary rate

Title: CEOs' raises averaged 15% in U.S. last year
Source: Associated Press
Date: July 29, 2004

From the article:
    The median pay for a chief executive officer in the United States rose 15 percent in 2003 and was up 22 percent among top executives at larger companies, according to a survey released Wednesday. The survey, by the Corporate Library, a research firm in Portland, Maine, showed increases in almost every category of executive compensation, including base salary, annual bonus, total annual compensation, restricted stock, long-term incentive payouts and the value realized from the exercise of stock options.

    The only category to decline from 2002 to 2003 was the value of stock option grants.

    Despite some calls for restraint in pay, it was a better year for the executives than 2002, when the median total compensation rose 9.5 percent.

    'With statistics such as these, it would appear that any chance of reining in executive compensation has disappeared,' the report said.
It is true -- in the current environment, there is no hope of reining in executive compensation. When CEO pay is rising at a rate of 22% per year at larger companies, if means that the pay ofexecutives under the CEO is also rising just as quickly. They are getting higher salaries, higher bonuses, more stock, more options, more long-term incentives and more perks. If your pay is rising at a rate of 20% per year, then it only takes four years for your pay to double because of compounding.

All of that money is coming from you and me. We all pay highly inflated prices for everything we buy, and we all get paid less so that money can funnel to the executives. That is why pay for normal Americans is actually falling when adjusted for inflation -- all of the money is going to executives instead.

This is the insidious process of the concentration of wealth. More and more money flows to a small group. With that money, they buy government influence and legal protection, meaning that even more money flows to them. And the cycle repeats in an upward spiral.

We must break that spiral, or be imprisoned by it. The nation's wealth, instead of being concentrated in a few, needs to spread out to everyone for the benefit of all.