Life is good at the top of corporate America. CEO pay rose 12% last year, bringing the average compensation to $9.6 million in 2010, based on a report and study done by NY Times. That's definitely a lot of money at a time when middle class wages haven't increased for a generation and unemployment remains near 9%.
The highest paid CEO in the U.S. last year was Viacom's Phillipe Dauman who raked in $84.5 million, thanks to one-time stock awards. Ray Irani of Occidental Petroleum follows on the list with $76.1 million, a 142% pay increase over 2009. Oracle's Larry Ellison, who was displaced at the top of the list this year, took a pay cut but still brought home $70.1 million. (He also remains the third-richest American, with a net worth of $39.5 billion, according to the Forbes annual list of billionaires.)
Other notables on the list include:
John Lundgren, Stanley Black & Decker, $32.6 million.
Brian Roberts, Comcast, $28.2 million
Robert Iger, Walt Disney, $28 million
Alan Mulally, Ford Motor, $26.5 million
Samuel Palmisano, IBM, $25.2 million
Investing with the highest paid CEOs isn't necessarily the best for shareholders. True, leaders like Ford's Mulally, J.P. Morgan's Jamie Dimon and Apple's Steve Jobs have turned around their firms and lifted the share price; but this is the exception not the rule when it comes to CEO pay. Plus, this kind of payout for the top brass is also not the norm outside the United States, according to a recent Gretchen Morgenson column on CEO pay in The NY Times.
Albert Meyer, a money manager at Bastiat Capital in Plano, Tex. and former forensic accountant the center of, illustrates the point by comparing Norwegian owned Statoil to ExxonMobil:
By comparison, Rex W. Tillerson, the chief executive of ExxonMobil, received $21.7 million in salary, bonus and stock awards in 2009, the most recent pay figures available from the company. Mr. Tillerson's pay is more than double the combined $8.3 million that Statoil paid its nine top executives in 2010."
According to regulatory filings, Statoil paid Helge Lund, its chief executive, 11.5 million Norwegian krone in 2010 (roughly $1.8 million at the exchange rate last year). There were no stock options in the mix, but Mr. Lund was required to use part of his cash pay to buy shares in the company and to hold onto them for at least three years.
"Statoil, which is two-thirds owned by the Norwegian government, pays its top executives a small fraction of what ExxonMobil pays its leaders. But Statoil's share price has outperformed Exxon's since the Norwegian company went public in October 2001. Through March, its stock climbed 22.3 percent a year, on average, Mr. Meyer notes. During the same period, Exxon's shares rose an average of 11.4 percent annually, while the Standard & Poor's 500-stock index returned 1.67 percent, annualized.
With executives like Tillerson the others on the list, the gap between U.S. CEOs and average worker pay is widening. The average private sector worker saw their compensation grow just about 2% in the last year. The good news is shareholders now have more "say on pay" because of the Dodd-Frank bill. Whether they exercise their rights and restrict CEO in a major way is yet to be seen.