Monday, January 16, 2006

The Rich Get Richer

The Philadelphia Inquirer has a good article, entitled "On payroll, CEO stands for certainly excessive officer," about the increase in the already astronomical executive salaries.

I agree with everything that the article this day and age, where the middle-class is struggling to find affordable housing (here in the Northeast anyway), companies are taking away pensions, and raises are just keeping pace with inflation, these executives are commanding huge salaries that are not in line with what is happening at the company.

In a recent study, two professors found that "from 1993 to 2003, total cost of executive pay grew from 5 percent of annual corporate earnings to 10 percent." That isn't just a 5%-10% raise, that is 5%-10% of the companies earnings.

It then goes on to say that "Another study by the Corporate Library found that total compensation for corporate directors grew about 20 percent between 2004 and 2005, with the median director receiving about $151,000 at large companies, $104,000 at midsize ones, and $82,000 at smaller ones." Anyone else get a 20% raise last year? I know that I didn't.

I am not saying that executives don't work hard and deserve to be paid well for it. I think that they probably sacrafice a lot to get to the top. However, I look at it a lot like I look at the ridiculous salaries that professional athletes is just too far out of line with what regular people make. It continues to put them further and further out of touch with reality and what is actually going on in the company. My companies stock has been totally stagnant for a long time now, yet our executives are getting paid very well still.

JLP from All Things Financial has some comments on the issue as well in his post entitled "SEC Wants More Disclosure on Executive Pay."


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