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The Cost of Doing Business?

July 2, 2013

Hey, would you like a big raise this year?  Maybe you should just run most or all of your company.

The top 200 chief executives at public  companies with $1 million in revenue or more received a big combined pay raise  last year.

The median CEO compensation package in 2012  amounted to $15.1 million, up a whopping 16 per cent from 2011, according to the  executive compensation analysis firm Equilar Inc.

Larry Ellison tops the list at Oracle, and he’s good at spreading the wealth:

CEOs weren’t the only ones who say big salary  gains in 2012. Other C-suit executives at large public companies also received  large pay packages last year.

Safra Catz, Oracle’s chief financial officer  and co-president, and Mark Hurd, Oracle’s other co-president, both received pay  packages worth $52 million in 2012.

‘The interesting thing is that there are  people at these companies that make as much or more than other C.E.O.’s’ Brian  Foley, an independent compensation consultant in White Plains, told the  Times.

Oracle meanwhile went up about 10% for the year (or fiscal year, either is close).  I suppose if the shareholders are happy with the results, they can support paying whatever the company bears.  And that, honestly, is the story here.  CEOs at public companies are paid by the board, which represents the shareholders.  I’m sure many could complain that the stock is held by such a small majority, that the small player doesn’t have a say.  Well, yes.  That’s not a good fact or a bad fact.  It’s just a fact.

These people make much more money than I’d honestly want to make.  Maybe it’s me, but it seems that nobody’s ever happy with what they have, always complaining that they want more.  The scale of wanting more when you’re worth millions or billions doesn’t seem interesting to me.  At all.

But back to my point.   A company, especially a big one, is a very complex array of moving parts.  One of those moving parts is leadership.  If the company believes that it has to pay a leadership burden to keep a unique leader, then it will do it.  Very few people complain when a company opens a new manufacturing facility for millions of dollars, so what’s the cause for “opening” a new leadership role that costs the same if that’s what the company needs for success?  If it overpays, then a better competitor that is more efficient is poised to win.

I think we obsess too much over who makes what.  The high pays of CEOs are just one example.

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