At Work

When you hear about executive pay …

Listen to some politicians and you will hear that this or that CEO has a salary or pay of say $25 million. 

That’s a whopping number no matter how you slice it, but relative (Megan Kelly is supposedly seeking $20 million a year in salary). 

Nevertheless, there is a big difference between salary and total compensation. For the typical CEO of the $25 million, 11.8% is base salary. All the rest is variable pay at risk such as long-term 4.6% and annual bonuses 20.9% which are based on performance. 

53.6% is stock awards and stock options. The rest is benefits and perks. 

Data Source: Hay Associates study

Realistically the stock awards have value if the stock prices increase which benefits a lot of people from college endowments to pensions plans and 401k plans. 

Whether incentive compensation is fairly assessed and earned is an open question as is the accountability demanded by boards of directors. 

However, the hysterical claims by politicians need scrutiny. CEOs are the target while the huge salaries earned by celebrities and sports heros are never mentioned. It seems to me one issue to consider is who contributes more to society, who creates jobs and value, who advances the economy through technological and other advances?

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1 reply »

  1. So, if you run the numbers you prove lifting the cap is better for the SS trust fund $365,000 vs $15,000 per year is a big influx of tax revenue. Celebrities and sports hero’s are never mentioned, but they will end up paying the additional tax.
    They are going to do it, and they will not raise what the top earners get in SS benefit. That is the only way they can continue to fund the Welfare Retirement System, we all call Social Security, without raising the SS tax rate 3 to 4 percent or more.. A 1.5 to 2 percent raise in the SS tax rate over 10 to 15 years will be an easy sale, for the political class. .

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