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View Diary: The McDonald's Pay Gap Is 520 To 1 (14 comments)

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  •  He took it home but it was not salary. Look (0+ / 0-)

    I used a colloquialism on purpose. The simple point is that he is paid through various forms, whether salary, options, grants, perks, benefits and every other means that CEOs manage to enhance their net worth and the quality of their lives, 500 times more than the guy on the line.

    Oh yes, I was one who pushed for companies to value options. Is it done as well as it could be? No. But here's the rub. If you compensate someone with something of indeterminate value how do you know if you paid too much or too little. The day that we stop all stock compensation, options or otherwise, will be a better day for corporations, their shareholders, and the country.

    Further, affiant sayeth not.

    by Gary Norton on Wed Dec 12, 2012 at 07:47:19 PM PST

    [ Parent ]

    •  Gary, the rise in equity compensation was a direct (1+ / 0-)
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      nextstep

      result of Clinton's push to have a limit on how much executive compensation could be deducted for tax purposes and the resulting adoption of Sec 162 (m). Before 1993 a much larger portion of CEO compensation was in base salary. After the $1 million limit for tax purposes was initiated it caused compensation committees to look much closer at total compensation and making a larger portion of the compensation variable, and subject to performance standards. In theory all of that was positive. However, if you had a CEO who was making $3 million a year, with $2.5 as salary and a potential for a $500,000 bonus, the thought was that if the base was going to be $1 million then the high end of the potential bonus had to be much higher than $2 million and just take the CEO to a break even, there should be significant upside above the total of $3 million. It the company exceeded its annual targets the CEO should have a $4 million bonus and it shouldn't all be in cash. And that's what happened.

      I think equity compensation has gotten out of hand for senior executives but I like it as a concept, particularly with four year vesting and clawback provisions. It costs the issuing company no cash and creates an ownership stake within the senior management. If senior management has little ownership it can make a company a more likely target to a private equity offer.  

      "let's talk about that"

      by VClib on Wed Dec 12, 2012 at 08:49:36 PM PST

      [ Parent ]

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