The pay for CEOs of public companies continued its upward climb in 2014 according to a report by The Conference Board, a business research organization. The report, published in August, claims that total compensation for chief executive officers of US public companies in the Russell 3000 Index rose up 11.9 % from 2013 and as much as 34.7 % from 2010.
The Conference Board cites the rise in the stock market as the chief driver of the increases in CEO compensation which, when connected to share prices, is considered “performance-based” compensation. Not surprisingly, performance-based compensation structure lead CEOs to try to stoke higher stock prices using dubious means.
One dubious method of stoking stock prices to increase compensation for CEOs is stock buybacks. Stock buybacks are the use of company money to buy the firm’s own shares. The buying back of stock can — at least temporarily — lead to a higher share price, but a stock buyback does not really change anything about the company. It is, at best, a short-term gimmick and, at worst, a scam.
Of course, not every high-paid CEO has found tricks to juice the stock price in time for the corporate compensation committee. But that has not stopped them from being well paid. According to The Conference Board, 8 CEOS made the list of top 25 compensated CEOs in 2014 despite the companies they ran having a negative annual return for shareholders.
The highest paid CEO for 2014, David Zaslav of Discovery Communications, was paid $156 million despite the company’s stock losing a quarter of its value.
As Francine McKenna of Market Watch points out, while 2014 was a great year for the corporate elite, workers’ compensation continued to stagnate. According to data from Sentier Research cited by Market Watch, median household income only rose 3.3% in 2014.
Workers, unlike CEOs, are not able to juice the market or pack corporate compensation committees with their cronies to get a windfall. Workers typically get compensated via wages and wage-growth in 2014 was like wage-growth for the last 35 years, pathetic.
As the Economic Policy Institute noted, “With few exceptions, real (inflation-adjusted) hourly wages fell or stagnated for workers across the wage spectrum between 2013 and 2014—even for those with a bachelor’s or advanced degree.”
It would seem that compensation in today’s America is less about hard work and more about rigging the game.