I was recently reading an article in readers digest about how CEO's make too much money. The basic argument was.. well.. I'm not sure what the argument was, other than they get paid a lot and somehow that can't be right. They did manage to sneak in some vague data about how CEO's who don't perform still make a lot of money. It made me wonder if writers who write crappy articles still get paid. I suspect they do.
The idea that CEO's are overpaid bothers me for a number of very important reasons:
- Good CEO's are really, really hard to find. Really. What it comes down to is supply and demand. If you want a good CEO (one with a proven track record) they're going to cost. How much? At least as much (probably more) than the next guy is willing to pay for him. This is what Economics 101 refers to as "the law of supply and demand". What's ironic is that YOUR salary is calculated the SAME WAY. In other words (for those who are slow) the reason he makes so much money is because someone else, somewhere, is probably willing to at least match it. That's not unfair -- that's market-rate for genius. How does "genius" become cheaper? By being less in demand. As soon as companies aren't interesting in smart people anymore, their salaries will go down. For your sake, I hope that doesn't happen any time soon.
- Being a CEO is hard work. We admire their lavish houses, their fancy cars, and their beautiful women, but they also tend to work 90 hours a week, travel 90+% of the time, and rarely see their families, their homes, or their fancy cars. Furthermore, it doesn't matter how poorly or how well the company is doing, there's always somebody breathing down their neck that they could and should be doing better. Billions of dollars better. I should also be sure not to leave out the amount of work required to actually become a highly-paid CEO (believe me, these guys didn't get there by taking weekends off, like you seem to do).
- Why do you care how much the CEO is making? It's unlikely the salary of the CEO is impacting your bottom line. The paycheck you receive likely be unchanged if the CEO took a pay-cut. While I realize this concept may be difficult to grasp for some, the reality is that your value to the company is unrelated to the CEO's value to the company, and therefore, neither is the size of your paycheck related to theirs. Your job is much different from the CEO's job. He was hired for one task, and you were hired for another. The real question you should be asking yourself if you believe you should be making money money is: How come you're not? Are you worth more than what you're getting paid? If so, why are you not getting it? Should you switch jobs? If not, maybe you're getting paid fairly. Calculating how much money a person is worth to a company is simple: How much is that company paying them. Compare to how much the company would pay them if the employee was on the way out the door OR the amount of money another company has offered them (NOT how much they "could" make if they switched -- but what's actually been offered -- this is an important distinction because most people feel they're worth far more than any company might be willing to pay them).. If it's the same, then the employee is making what they're worth.
If you've got an issue with how much your CEO is getting paid: I've got three words for you: Welcome To America!! Land of opporunity!! Why don't you start your own company and grant yourself the same title with a big fat raise?