CEO vs. worker pay: How big a deal?

Posted: September 30, 2013

It is good to be the king. Or queen.

How good?

Well, Brian L. Roberts earned $25,087,379 in compensation last year as president and chairman of Comcast Corp., according to Equilar, which conducted a survey for The Inquirer of executive compensation at publicly traded area companies. (His compensation was tied to Comcast's stock performance, which rose about 60 percent in 2012.)

That figure put Roberts at the top of the heap, locally, and is about 294 times the $85,000 median salary of all Comcast employees, according to the website SalaryList, which says it derived that median figure from government and company reports.

If a rule recently proposed by the Securities and Exchange Commission is formalized, publicly traded companies will be required to disclose that ratio.

The proposed rule is a requirement of the 2010 Dodd-Frank financial law. It passed an initial SEC vote Sept. l8.

Republicans and management find no value in what is seen as a politically driven exercise.

"Proponents have acknowledged that the sole objective of the pay ratio is to shame CEOs," Republican commissioner Michael Piwowar said before the vote.

Democrats and labor counter that CEO pay so outstrips that of average workers that it undermines morale and productivity.

"Astronomical CEO pay is based on the false idea that the success of the corporation is due to one CEO genius," AFL-CIO president Richard Trumka said in a statement posted on the union's website.

There is no question that executive compensation has been growing astronomically compared with that of average workers.

According to the Economic Policy Institute, the average CEO compensation in 1965 was 20 times that of the average worker. In 2012, CEO compensation was 202 times that of the average worker.

Raj Gupta, former CEO of the Rohm & Haas corporation, saw little value in the ratio as a method measuring the appropriateness of compensation.

To start, the complexity of differing business operations would often mean the ratio will simply be a confusing piece of information even for comparing CEOs within the same industry, said Gupta, now senior adviser to New Mountain Capital.

Steven Balsam, an accounting professor at Temple's Fox School of Business, also thought the provision seemed a poor way to determine if a CEO was over- or underpaid. A better measure, he said, would be to examine peer groups of CEOs from similar companies.

"The issue of executive compensation has been controversial since the start of the modern corporation," Balsam said. "What I find interesting is there is a big uproar when a CEO makes $25 million, but I don't hear the same complaints when the Phillies pay Ryan Howard $25 million a year."


© chepp@phillynews.com

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