Why Are These CEOs So Overpaid? Maybe Since They're Chairmen, Too

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Lloyd Blankfein Jamie Dimon
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The growth of executive compensation in America is a kind of success story, viewed from one perspective: According to a 2012 study by the Economic Policy Institute, American CEOs saw their pay increase by 725 percent since 1978 -- more than 127 times faster than worker pay grew during the same period. And when the numbers are adjusted for inflation, average wages have been essentially flat since the 1970s, in spite of the fact that worker productivity has gone up markedly since then. Workers have earned a raise, in other words, but unlike their bosses they haven't gotten it: Last year, wages accounted for just 43.5 percent of GDP, a record low. (Until 1975, that number was almost always over 50 percent.)

What accounts for this divergence? One compelling theory points to the rise of executives' control over their own compensation, a problem of corporate governance recently highlighted by the case of Jamie Dimon, who holds the dual roles of CEO and chairman at JPMorgan Chase (JPM). This arrangement survived a recent shareholder attempt to establish an independent chairmanship following years of run-ins with regulators, which one shareholder claimed had cost the bank $16 billion since 2009; Dimon, who has no clear successor and threatened to leave the bank if he lost his spot at the head of the board, proved too strong for the insurgency. As Halah Touryalai observed at Forbes, "JPM has seen record profits for the last three years and not one quarterly loss during Dimon's tenure."

Dimon isn't the only executive to occupy more than one top position at a company. Lloyd Blankfein, the best-paid banker of 2012, wears both hats at Goldman Sachs (GS); John Stumpf, who came in second, has the threefold title of chairman, president and CEO of Wells Fargo (WFC); and Richard Fairbank, No. 3 in last year's compensation ranking, is chairman and CEO of Capital One (CFO).

"All of them are being overpaid," said Eleanor Bloxham, CEO of an Ohio-based board advisory firm, speaking to Bloomberg. "The bank boards still don't have a good handle on how they should be compensated." Maybe in part because those boards are chaired by the managers whose pay packages are up for consideration at meetings.

Writing at The New York Times, Adam Davidson argues that excessive CEO pay is not a primary problem of U.S. business, using the example of Apple's (AAPL) late founder and savior: "[Steve] Jobs was worth an estimated $7 billion at his death, but he made hundreds of billions of dollars for his shareholders. Many now say he was underpaid."

Even setting aside the exceptional nature of Jobs' performance, his example seems to undermine a standard premise of arguments in favor of huge CEO paydays -- namely, that prodigious compensation is required to retain the best talent. For Jobs stayed at Apple, a company he built and believed in, even in the absence of Larry Ellison-level pay. In any case, Davidson concedes that "a board tends to side with its chief," and concludes that the remedy is to empower shareholders to oust lax directors who fail to hold management accountable. Noting the result of the Dimon vote, ProPublica's Jesse Eisenger reaches the opposite conclusion: "Shareholders are part of the problem, not the solution."

See the rewards being reaped by a handful of U.S. chairman/chief executives in the slideshow below. (Figures via Bloomberg.)


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JIM ISHOO

These people should have been in jail long time ago.

June 01 2013 at 1:20 AM Report abuse rate up rate down Reply
ken

GOOD FOR THEM

May 31 2013 at 4:32 PM Report abuse +1 rate up rate down Reply
setanta54s_back

if these c eeeeeeeeeee OOOOOOs are not on the PUBLIC PAYROLL via the bs bailouts.
then it's NO ONE'S BUSINESS
beyond THEIRS and their corporations.

May 31 2013 at 4:02 PM Report abuse -3 rate up rate down Reply
Bill

hhughjardon must be a shill for these overpaid executives. If not then he qualifies for dummy of the year.

May 31 2013 at 4:01 PM Report abuse +3 rate up rate down Reply
1 reply to Bill's comment
h.hughjardon

Bill...don't project your crappy job and pay onto me. I'm a blue collar middle class schmo like most. But my lot in life is a direct result of choices I have made in my 47 years of life. Perhaps it's your envy and victim mentality that is holding you back. Don't like your working agreement? Negotiate a new one.

I would return the name calling but I actually pity you. Best of luck in your miserable life.

May 31 2013 at 11:01 PM Report abuse -2 rate up rate down Reply
Bill

Blame the universities who teach this kind of compensation for these overpaid people. All professors should be paid about a tenth of what they get as thats what they are worth. When you have idiot teaching people how to steal conive and cheat this is what you get., a disfunctional system.

May 31 2013 at 3:58 PM Report abuse +4 rate up rate down Reply
aangelu697

All CEO's are over paid

May 31 2013 at 2:35 PM Report abuse +6 rate up rate down Reply
1 reply to aangelu697's comment
greenliks

I totally agree. they were over paid in 1970, now they are perversely overpaid. they prey upon good employees and steal their wages. ceo s are even worse than the gov t!

May 31 2013 at 4:47 PM Report abuse +3 rate up rate down Reply
Artie

Anyone who defends these greedy bastards and their enormous compensation packages has a screw loose and a very short memory. It was these same "banksters" and people like them who brought the global economy to its knees not that long ago and required a bail out.. And, yet ....not one of of these "wise guys" or banksters ( doing "God's work" as Lloyd Blankfein said) went to jail. Just goes to show that "crime" pays....big time!!

May 31 2013 at 11:38 AM Report abuse +2 rate up rate down Reply
1 reply to Artie's comment
h.hughjardon

Was it illegal?

All I'm saying is they negotiated contracts with the board. Negotiate one just like it and have a good day.

May 31 2013 at 12:06 PM Report abuse -5 rate up rate down Reply
8 replies to h.hughjardon's comment
Artie

After a while, you just shake your head and say, how much money does any one individual need?. And, they can't be worth that kind of money regardless of what they do or don't do. It has gotten beyond absurd. These "banksters" exist in an already corrupt and rigged industry that makes its own rules, controls politics and thus ...the law. They have all the politicians in their pockets. Much of what the banking industry does is off the radar. They don't answer to anyone but themselves. And, regulation is really non existent, since they (the banksters) make the rules. There is no real oversight when it comes to these jokers..People forget all too soon that we, the taxpayers of this country, to bail them all these crooks and wise guys out when these bastards got too greedy. A bunch of these guys are outright crooks and liars and belong behind bars. Not one of them has gone to jail. Instead they are rewarded with King Midas sized bonuses for being rocket scientists of the financial field.. As with politics though, there is little I or anyone else seems to be able to change. Big money always talks and everyone else walks.

May 31 2013 at 11:29 AM Report abuse +2 rate up rate down Reply
1 reply to Artie's comment
h.hughjardon

Who are you or I to say how much income anyone needs?

May 31 2013 at 12:07 PM Report abuse -3 rate up rate down Reply
1 reply to h.hughjardon's comment
setanta54s_back

LOL all the juniour komrads MUST spew and regurgitate THE PARTY LINE !!!!!!!!!!

May 31 2013 at 4:06 PM Report abuse -4 rate up rate down
franzr00

It really is human nature. Friends helping friends, and they are not playing with their own money. And many want to say they pay the most since they got the best, which is really usually delusional.

After a long fight, shareholders finally have an advisory vote on compensation, but even then the votes are stacked against the shareholders.

It is a rigged system. For most employees, it is pay for performance. But in the rarefied executive suites, it is simply pay and more pay. And golden parachutes if performance isn't accomplished.

If you don't like the system, you can not buy stocks. But still, you are affected, since pensions, etc. invest in the stock market. So you are impacted by the system whether you like it or not. No one is asking for the government to take over setting salaries. Just transparency and equity.

Then there are the perks. If a CEO makes $10 million, why should shareholders pay for his tax advice? The money he is able to avoid through shareholder paid advice is the taxes you and I get stuck paying, or the government borrows to pay the bills. (Yes, most executives get company paid tax assistance; just look at the annual reports to see that is true.)

May 31 2013 at 8:00 AM Report abuse +3 rate up rate down Reply
h.hughjardon

CEO compensation is set by the board of dircetors.
I'm so sick of this garbage being printed.
If you want CEO pay, become a CEO. If not, earn what you can doing wharever else.

May 30 2013 at 8:22 PM Report abuse -9 rate up rate down Reply
1 reply to h.hughjardon's comment
setanta54s_back

again and again---little komrads MUST TOE THE PARTY LINE as they WERE TAUGHT by their commie MASTERS.

May 31 2013 at 4:08 PM Report abuse -3 rate up rate down Reply