Are CEOs 275 Times Better Than The Rest Of Us?

“Greed is good.”

These immortal words, uttered by Michael Douglas as Gordon Gekko in Oliver Stone’s 1987 smash hit Wall Street, were iconic of the go-go, Reagan-era 80s. The story of an ambitious young trader who gets caught up in a world of high-stakes trading and questionable ethics, gambles everything and loses it all has become as applicable today as it was 20 years ago.

The New York Times released a graph from an Economic Policy Institute study showing that executive salaries were 275 times the average worker’s salary in 2007, compared to only 28 times the average worker’s salary in 1970. (To see a visual representation of this graph, visit Portfolio.com).

In today’s dollars, if the average worker was pulling in $30,000 annually that would mean the average CEO would be making a whopping $8,250,000 per year.

Can someone really be worth 275 times more than someone else?

I’m sure most of us would agree that a CEO candidate usually brings more education and experience to their job than does the average worker, but do they truly bring 275 times more? Is the work that a CEO does worth 275 times that of the average employee?

A CEO is charged with making decisions both large and small. They lead the company, they have the ultimate say and absorb the responsibility of making the right decisions, all of the time. The fate of the company rests on their shoulders and they should be compensated accordingly. But a company is not a singular entity. One person alone could not run a fortune 500 business. Does not every employee from the executive in the penthouse to the receptionist in the lobby play a vital role in making a business successful?

As our members of congress hammer out one of the most massive government bailouts of private industry in our history, a major stumbling block to the negotiations has been whether or not to put caps on what some perceive as ballooning executive pay. If message boards are any indication, Americans are outraged at what they see as outrageously excessive compensation. Every article I read on the bailout or executive pay is accompanied by hundreds of comments, none of which defend executives. Why is the average American worker so angry?

In most businesses today I think there is a systematic de-valuing of the contributions of the average worker. While a high-priced consulting firm with years of experience and a brilliant portfolio may come up with extensively researched, strategically written customer service scripts to ensure maximum sales for a call center, it is the ‘lowly’ call-center employee who is on the phone with a dissatisfied customer, providing friendly voice, sympathetic ear and exercising their critical thinking skills to create a win-win situation for both the company and the client.

Yet, a call-center worker who spends all day everyday working the phones is treated to less respect, fewer benefits and lower pay than someone who spends their time “being creative” in an office with a view.

The American worker is angry because they are overworked, underpaid and disrespected. After watching corporate executives jump off a sinking ship with golden parachute strapped to their backs while employees and shareholders are left holding the bag (see the failure of my local bank, Washington Mutual), congress is now asking these displaced workers, these shareholders who are looking at their retirement accounts being gutted to pick up the pieces and bailout Wall Street.

I’m resigned to the fact that a bailout is necessary to keep our economy and financial sector from collapsing, but executive pay has skyrocketed beyond reason and it is time for those at the top to remember that no man is an island, and they can’t take singular credit for the efforts of many if they don’t plan to take the blame as well.

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3 responses »

  1. Pingback: Executive Pay: How Much is Too Much?

  2. Pingback: Executive Pay: How Much is Too Much?

  3. Looking at it that way, one could argue that the CEO is worth that much more because he or she won that much new business as leader of the organization. Comparing it to sports, fans are coming to the game to see the franchise player, not the person selling nachos at the concession stand. I’m not saying CEOs aren’t overpaid, just looking at your argument in a different context.

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