Are CEO's Worth That Much More?
This is a great article from The Christian Science Monitor:
University of Pennsylvania President Amy Gutmann was one of the highest-paid nonprofit leaders in 2005, with $675,000 in earnings, according to the Chronicle of Philanthropy’s most recent survey. That’s hardly a paltry sum. But compare her pay with the $60 million pocketed last year by Bob Simpson, the chief executive of XTO Energy. This company had lower revenues last year than UPenn and employs less than 2,000 workers. Ms. Gutmann, for her part, oversees an enterprise with nearly 5,000 faculty and 24,000 students.
Is running an oil company really 90 times more valuable than leading one of the top-ranked institutions of higher learning?
The article goes on to point out that the salaries of the 20 highest paid CEO’s of publically traded companies are 38 times higher than those of the 20 highest paid non-profit CEO’s, and 183 times the 20 highest paid public sector officials (This includes the salary of the President of the United States).
Go after CEO salaries on the basis of cronyism in the board room and shareholders (which include institutional investors like UPenn) deprived of return on investment, directly and indirectly from profits that should have been reinvested, instead of paid out to execs. Don’t do it by comparing what they make to what non-profit execs make.
Non-profit is the operative phrase. I don’t care how big UPenn is compared to XTO Energy. I don’t think you can defend that line of reasoning and you only deflect more appropriate criticism of excessive ceo salaries by trying.
Thanks for you comment DaveH. I think you make a very good point. I agree with your method of evaluation, but think looking at the differences in aggregate can also be useful.