In 1981 I bought 100 shares of Exxon stock. It has been the best long-term investment that I have made in my life. The company itself (now known as ExxonMobil) is one of the largest and most influential companies in the world. Because I own the stock and receive its annual report, I was able to gather the following information about the compensation of its chief executive officer (CEO).
Let me preface this report with a brief statement. American companies devote many pages in their annual reports explaining the rationale for and the details about the compensation of their executives. The rationale is that a CEO should be rewarded for the successful leadership he (or occasionally she) has provided for the company. In addition, the executive’s interests should be aligned with the interests of the company, which means they should receive a large portion of their income based on the successful performance of the company’s stock. In order to enhance this alignment of interests, a significant portion of the executive’s compensation involves the granting of shares of company stock or options to purchase shares of the stock at a fixed price. In essence, the owners (the shareholders) of the company are giving away a portion of the company each year to the executives so that the executives will do the job for which they are being paid better than they would if they were just paid like the rest of the company’s employees. Many companies give their executives the equivalent of two or three percent of the company every five years. In 150 years they will have virtually given away the entire company (in actuality, the shareowners’ ownership is merely being diluted).
Decisions about executive compensation are made by a board of directors elected by the shareholders (though nominated by the currently entrenched board of directors, which generally is composed of CEOs of other companies). In the case of ExxonMobil, the members of this board of directors are paid $240,000 to $614,000 a year to oversee the performance of the company. [To put this in perspective, directors are being paid $1,000-$2361 per work day if they worked 260 days per year.] Some of this director compensation also is designed to align the interests of the directors with the company by giving them stock grants and stock options. It seems that the money they are paid is not a sufficient enough motivation for the day or two per month they spend in oversight of the company’s and shareholders’ interests (if they actually devote two days a month to their duties as directors, their daily compensation rises to $10,000-$25,583 per day)
Now let’s look at the annual compensation of ExxonMobil’s CEO for 2009:
Salary -- $2,057,000 ($7,911 per work day, or the equivalent of the annual compensation of 136 minimum-wage workers)
Bonus -- $2,400,000 ($9,230 per work day, or the equivalent of the annual compensation of 159 minimum-wage workers)
Stock Awards -- $16,963,875 ($65,245 per work day, or the equivalent of the annual compensation of 1,125 minimum-wage workers)
Change in pension value -- $5,466,517 ($21,025 per work day, or the equivalent of the annual compensation of 362 minimum-wage workers)
In addition the CEO received other benefits (life insurance, savings plan, personal security, personal aircraft usage, financial planning help, etc.) worth $280,925 ($1,080 per work day, or the equivalent of the annual compensation of 16 minimum-wage workers)
By the way, the CEO also owned 1,325,613 shares of company stock (that $88 million current valuation alone would seem to me to be sufficient alignment with the interests of the company).
My question is not merely, “Why are executives paid so much?” My questions are, “Why are people who are paid so much showing so little concern for the poor? Why are they so intent on keeping the minimum wage so low? Why are they so worked up about paying taxes that support education, health care, and other social services? Why are they ignoring the Lazaruses who are lying at their doorsteps (Luke 16:19-31)?