The following is an Editorial comment from Bill Bonner taken from the Daily Reckoning e-newsletter. The publication is part of the Agora Publishing network which is linked to or at least sympathetic to various Libertarian organisations.
"The headline to a report in USA Today caught our eye
early this morning: “CEO pay soars in 2005.”
And no CEO’s pay soared more than the CEO of Capital One
Financial. Thanks to a generous package of options and
perks, Mr Fairbanks took home almost $250 million last
year – a sum greater than the profits of 550 Fortune
1000 companies, including Goodyear Tire, Reebok and Pier
1.
Do we begrudge him the money? Do we want to get together
a mob to string him up by the heels and shake the coins
out of his pocket? No, dear reader, not at all. In fact,
we rather admire him - he’s succeeded in gaming the
system; this fat squirrel has found the softest,
cosiest, niche in the ol’ oak tree. The median pay for
CEOs of America’s 100 largest companies rose 25% last
year to $17.9 million. Mr Fairbanks left them all
writhing in the dust.
More power to him.
Do any of these hustlers deserve even $1 million, let
alone $17 or $250? Probably not. There are probably
plenty of people who would do the job just as well for
less money. We say that from experience as well as
theory. We have been CEO of our own publishing business
for nearly 30 years. Nothing we ever did was worth $1
million in a year. Granted, it is a very small business.
But running a small business is harder in many ways than
running a big one. In a big company, you have squads of
highly-paid professionals to help you cheat the
shareholders. In a small company, you have to do it on
your own.
Mr Fairbanks owes his fortune to two things: he heads a
company that is in the debt mongering business at a time
when debt has never been more popular and he heads up a
business whose owners are idiots. In theory, Capital One
Financial’s profits should go to the capitalists who own
it. Instead, a big chunk of them go to the managers, the
wily hustlers who figure out how to hijack the
enterprise for their own interests.
Or take Mr Ivan Seidenberg, CEO of Verizon
Communications. In 2005, the top man at Verizon got a
raise of 48% - to $19.4 million. Wow, you would guess
that Verizon had a very good year, right? And you would
be wrong. Verizon’s owners saw nothing but misery. Their
stock went down 26%. Their bonds were downgraded.
Earnings declined 5.5%. And even the other managers had
to be clipped back; 50,000 managers had their pensions
‘frozen,’ according to the New York Times report.
How did Mr Seidenberg do so well amidst so much
financial suffering? He hired an independent consultant
to help determine what his pay should be. This
consultant noted that the company had exceeded its
‘challenging’ benchmarks and rolled over.
But it turns out, the consultant was not so independent
after all. Instead, he had been doing business with
Verizon for years and had received about half a billion
dollars from the company since 1997. Neither Verizon nor
the consultant is talking, according to the TIMES."