Those who put in a hard day of agricultural labor and representatives of ag businesses who convince customers to purchase goods and services are among the Americans who underestimate what CEOs of major corporations earn for “leading a company.”
The Stanford Graduate School of Business and Stanford Law School initiated a survey where 1,200 people were queried about the public’s perception of CEOs and their compensation.
Overall, respondents believed most CEOs made less than a tenth of what they actually do—on average, they thought CEOs earned nearly $1 million, whereas the real average is about $10 million. Still, 74 percent think those CEOs are overpaid (at their average guess of $1 million), according to the results announcement.
David F. Larcker, a Stanford GSB professor of accounting and the lead researcher of the study, said, “CEO compensation figures are much higher than the public is aware of. In many parts of the country, it is incomprehensible that anyone can earn this much money.”
It has been calculated that from 1978 to 2014 CEO compensation increased 997 percent when adjusted for inflation. CEOs today can make between 210 and 300 times what their employees earn. In comparison, the researchers noted that in 1965 CEOs made only about 20 times their workers’ pay, per figures from the Economic Policy Institute.
Companies with their fingers deeply into agriculture are no different than companies focused on other industries, as noted by a recent Reuters article. Chief executives of the newly being formed DowDuPont merged company will provide chief executives of the two original companies with a combined $80 million in “golden parachute” payments.
Golden parachute payments are written into top executive contracts requiring large compensation if their employment is terminated as a result of a company being taken over.
Dow CEO Andrew Liveris gets the major share of that $80 million--$52.8 million in cash, stock and other payments which includes $40 million he was going to receive upon retirement next year. DuPont’s Edward Breen, who has been CEO since October, will receive $27.2 million, Reuters reported.
As the Stanford study indicates, John Q. Public doesn’t think CEOs do enough to warrant the huge salaries and golden parachutes.
Americans are either skeptical CEOs actually create enough additional value to justify the compensation, or they don’t think the CEOs should be rewarded so heavily for it, said Stanford GSB lecturer and researcher Nick Donatiello.
What I thought interesting in the Stanford study report was a comment that companies’ board of directors think they need to provide the high compensation because it is “required to attract and motivate the right people.”
So, Joe Worker is expected to be motivated for $20 to $100 an hour while it takes $5,000 an hour to motivate someone to lead a company. There is someone wrong with that picture.
Personally, in looking at agriculture, I would rather have a higher compensation for all those research and development people who are coming up with new products to improve agricultural production that will ultimately make it easier to feed the increasing world population. And that higher compensation should be taken out of the CEO salary and benefits.