Salaries
Please read the series of articles, starting with Many S&P 500 CEOs Got a Raise in 2018 That Lifted Their Pay to $1 Million a Month by Theo Francis, The Wall Street Journal, March 17, 2018. This is an improvement for CEOs compared to 2016 when their pay actually decreased, as you read in the next two articles, CEO Pay Shrank Most Since Financial Crisis by Theo Francis and Joann S. Lublin, The Wall Street Journal, April 7, 2016, and CEO Pay Shrinks 4.6% but Offers Weak Reflection of Performance by Theo Francis and Joann S. Lublin, The Wall Street Journal, June 2, 2016. (All of the articles are attached.)
The recent gain to CEOs is attributable to the strong U.S. economy which was accompanied by robust corporate profits and strong stock market returns in 2018. Two years ago, the journalists called our attention to the large decrease in compensation received by the chief executives of the biggest U.S. companies last year. The decrease is attributable to weaker corporate performance and accounting rules. Yet, the median pay for the CEOs of approximately 300 large publicly traded companies in the United States was $10.8 million.that reference is to the pay for 50th percentile CEO, not the pay for all of the CEOs added together!
Next, please read a recent article from The Wall Street Journal, At Googles Parent Alphabet, Median Pay Nears $200,000 by Douglas MacMillan, April 27, 2018, which is also attached. Alphabet is the fourth-highest among S&P500 companies that have disclosed figures, but 18% less than at Facebook.
More recently, during the coronavirus pandemic, the corporate executives in the private sector still received bonuses, although the bonuses were smaller than in the recent past. This is according to the following articles: 66% of companies still plan to give bonuses next year (October 7, 2020), Many Wall Street bonuses are expected to take a hit this year (November 12, 2020), and Number of the Day (November 13, 2020), all by Jeanne Sahadi, CNN Business, which are attached.
On the other hand, Congress sets the salaries of the members of the Board of Governors of the Federal Reserve System. For 2019, the Chairpersons annual salary was $203,500. The annual salary of the other Board members (including the Vice Chairman) was $183,100. (www.federalreserve.gov/faqs/about_12591.htm)
And the annual salary of the President of the United States is $400,000 (plus $50,000 non-taxable expense allowance, $100,000 non-taxable travel account and $19,000 for entertainment). The Vice President earns $230,700 (plus $10,000 taxable expense allowance), Cabinet Secretaries earn $210,700, a Senator earns $174,000, a House of Representative earns $174,000, the Majority and Minority Leaders earn $193,400, the Speaker of the House earns $223,500, the Chief Justice of the U.S. Supreme Court earns $255,500, and an Associate Justice of the U.S. Supreme Court earns $244,400. (http://www.infoplease.com/ipa/A0875856.html)
In the private sector, there are mechanisms to measure the relationship between pay and performance (see attached article). In the public sector, which would include upper management at the Federal Reserve and the Federal Government, can performance and productivity be quantified and linked to pay?
Please consider the following questions and post your thoughts:
Do these salaries surprise you?
Compensation is often a critical component to attracting and retaining top talent in the corporate sector, especially among technology occupations. How does that compare with the public sector and government sector? Does this make sense?
Do you think that the salaries are reflective of the productive contribution of the individual? Or perhaps their productive contribution to the economy? If so, please explain the justification. If not, why not?
