Summary of The CEO Pay Machine

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Rating

8

Qualities

  • Background
  • Eye Opening
  • Engaging

Recommendation

The salaries and compensation packages companies pay CEOs have rocketed in recent decades: Even mediocre CEOs commonly receive $100 million paydays. Steven Clifford offers an eloquent evisceration of executive pay, blaming a cabal of compensation consultants and cozy directors. He’s a former CEO who has served on a number of corporate boards, so he’s able to use clear language and even humor to explain the taxability of stock options and the manipulation of performance benchmarks. Clifford is also a painstaking reporter. However, while his suggestions for stopping the CEO pay machine are intriguing, his idea for a luxury tax on executive compensation higher than $6 million is probably a nonstarter under the Trump White House. getAbstract recommends this engaging analysis to analysts, strategists, budget-minded employees and shareholders seeking contrarian insight into executive pay trends.

About the Author

Harvard Business School alumnus Steven Clifford served as CEO of King Broadcasting for five years and National Mobile Television for nine years.

 

Summary

“Crazy and Corrupt”

For decades, CEO pay has soared, defying economic gravity. Inflation-adjusted executive compensation increased 10-fold from 1979 to 2014 according to the Economic Policy Institute. During that timeframe, a typical worker’s inflation-adjusted pay inched up from $48,000 to $53,200. Overall, “CEO pay has grown 90 times faster than the pay of a typical worker.” In 1978, the typical CEO made just 26 times as much as an average worker. By 2014, that ratio had jumped to at least 300 times and perhaps 700 times, depending on which CEO database you use. In 2015, at S&P 500 companies where the CEO had been in place for at least two years, average pay was $12.6 million. Some CEOs rake in pay packages worth north of $100 million.

Headlines draw attention to the rise in CEO pay. The AFL-CIO is a vocal critic. Eye-popping CEO compensation is uniquely American: Japanese CEOs make just 16 times as much as typical workers. Why has CEO pay risen so much? Blame the CEO “pay machine,” a mechanism that business created unwittingly, but which CEOs have exploited. They’ve built a crazy and corrupt system. Astronomical pay packages hurt US ...


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