11th November 2021
Over the past three decades, executive compensation has risen dramatically, far surpassing the salary of the average American worker.
In a modern US corporation, the CEO and other top executives are paid salary plus short-term incentives or bonuses. This combination is referred to as ‘Total Cash Compensation’ (TCC). Short-term incentives usually are formula-driven and have some performance criteria attached depending on the role of the executive. For example, a CEO’s could be based on incremental profitability and revenue growth.
Leading the way, is Oracle Corporation, a multinational computer technology corporation, which by 2007 had the third-largest software revenue, after Microsoft and IBM. They gave their CEO Lawrence J. Ellison a total compensation package leading the way at $56.8 million.
Ellison founded Oracle in 1977, putting up a mere $1400 of his own money, under the name Software Development Laboratories (SDL). In 1979, the company was renamed Relational Software Inc., later renamed Oracle after the flagship product Oracle database. Oracle has faced its tough times though, 1990 saw it laying off 10 percent of its staff and having a near miss with bankruptcy. Over the year, Ellison has turned his company round. This year has seen the European Union approve the acquisition by Oracle of Sun Microsystems and has agreed that “Oracle’s acquisition of Sun has the potential to revitalize important assets and create new and innovative products.”
Then you have the likes of Proctor & Gamble in the list, a multinational company which manufacturers a wide range of consumer goods, and who is early 2010, became the forth largest corporation in the US by market capitalization, surpassed only by Exxon Mobil, Microsoft, and Walmart, who paid their former CEO, A. G. Lafley a total of $23.6 million in 2009, his last year before retirement.
Mentioning Walmart, their former CEO made it on here too. In 2009, their CEO, H. Lee Scott Jr brought home $30.1 million in compensation, which was mainly made up of his salary alone. But in actual fact, 2009 saw Scott leaving the company in the January. Walmart frequently came under criticism by the media and the public during Scott’s tenure. Lafley is largely credited for turning around P&G during his tenure under the mantra ‘Consumer is Boss’. During his leadership, sales doubled, profits quadrupled, and P&G’s market value increased by more than $100 billion dollars.
The only woman to feature on the list is Brenda C. Barnes, CEO of Sara Lee, and previously the first CEO of PepsiCo North America. Barnes has been making a name for herself for a number of years now, having been ranked in Forbes list of ‘The World’s 100 Most Powerful Women‘ since 2004. Then in 2009 she appeared at number 29 in Forbes list of ‘The World’s 100 Most Powerful Women’.
Barnes has shown that after taking time out to raise a family, you can also achieve a career – a very successful career to be ranked. In 2009, Barnes raked in $15,231,519 in total compensation. By comparison, the average worker made $40,690 – she made 374 times the average worker’s pay.
To put this in even greater perspective even our nation’s top political executive, President Barack Obama, earnt little over $400,000 last year. The debate as to whether CEOs warrant such astronomical salaries will undoubtedly rage on, even more so in the wake of such a devastating global recession. But surely, they must be doing something right…