Time after time I’ve been regaled with stories of greedy executives and their board members taking away lucrative packages whilst their companies flail in the wind. Whilst I admit that there are some particularly nasty individuals who have rode companies cheerfully into the ground whilst making themselves personally rich, there are quite a few executive staff out there who cop flack just because their position comes with what appears to be a large pay check. When in reality, their success is so deeply tied to the company’s profitability that if the company were to fail, they’d be as bankrupt as their workers.

Yet again I’m looking at the media for mis-representing the situation in order to create headlines to sell papers (funny little circle of corporate greed here). Let’s have a look at some companies and what their CEO’s are taking home in pay:

  • Accenture: CEO William D. Green takes home total compensation of US$15.2 million. Of that US$1.5 million is actual salary, with the rest being restricted stock options. Ignoring for a second that his salary is a drop in the bucket of Accenture’s total revenue ( US$25 billion, that’s with a B people) most media shops would report that as $15 million in actual pay, not unexercised stock options. In reality, if Accenture was to go down the toilet he’d still be well off, but almost 10 times poorer then what the media would have you believe.
  • HP: CEO/Chairman of the Board/President/Director Mark V. Hurd would appear to be living quite well as the top dog in this computing giant. His total compensation comes out to a total just on US$42.5 million, but his situation is a little bit more complicated. His total salary + bonus comes out to be about US$6.8 million and to be honest you won’t find many salaries higher than his, since once it’s past that the company can’t deduct it as an expense (same with bonuses, they’re seen as gifts). Over US$30 million is tied up in restricted stock options and what’s called a non-equity incentive plan. In essence should the company fail to perform either on a single year or over a period of time, he can lose a significant amount of his compensation. 1 bad year will hurt him for up to the next 3, so I wouldn’t be surprised to see his compensation fall in the coming years.
  • Apple: Steve Jobs, technological wiz kid, visionary (HA!) and CEO of Apple computers. By far the most interesting of the lot, his total compensation directly from Apple is a grand total of US$1. He does have unexercised stock options worth about US$8 million but if the company were to tank, he’d be left with what he has in his bank account. Many Google executives have similar arrangements, although I bet most of their money doesn’t come directly from their respective companies (think speeches, seminars and gifts from other companies).

Looking at figures like this you can see that many executives are financially bound to the success of the company. This is a common (and strategically sound) idea, since the CEO is the one who holds all the risk for the future viability of the company. People will often pine about the disparity between the top dog and blue collar worker but they fail to see the disparity in accountability, responsibility and skill that is involved in attaining such positions. An entry level worker simply does not have the skills and experience required in order to guide a company to financial prosperity.

However I do not support companies who have received government bailouts giving their executives any form of bonus, additional stock options or continued non-equity compensation. If a company is failing so badly that the government needs to save it your performance as a CEO is tantamount to the company being bankrupt, and your pay should reflect this. It would seem that President Obama also supports this viewpoint.

So, the next time the media sends you a story about the CEO or executive board being paid millions whilst the working class suffers please do a bit of digging to see exactly what their getting paid. Once you’ve done that have a look at the shareholders of the company to, as they’re the people most responsible for driving the CEO to ensure the long term survivability of the company.

Really, it’s better to keep your finger pointed squarely at yourself so you act, rather than blaming everyone else for your problems.

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About the Author

David Klemke

David is an avid gamer and technology enthusiast in Australia. He got his first taste for both of those passions when his father, a radio engineer from the University of Melbourne, gave him an old DOS box to play games on.

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