The Wall Street Journal compiled a summary of the highest paid CEOs of the decade which was definitely a learning experience for me. There were some obvious players that I expected to see on there, but there were also some surprises, from some very poorly performing companies. In terms of shareholder returns compared to their pay, some of these guys are downright despots. When shareholders take a bath and the CEO makes the top 25 list, there’s definitely a disconnect there. But of course, much is dependent on timing, the method used to calculate and other factors. Here’s the list and then my thoughts:
Total Comp (Mil) / Company / Name
1,836 / Oracle / Lawrence J. Ellison
1,143 / Interactive Corp-Expedia / Barry Diller
857 / Occidental Petroleum / Ray R. Irani
749 / Apple / Steve Jobs
569 / Capital One Financial / Richard D. Fairbank
529 /Countrywide Financial / Angelo R. Mozilo
518 / Nabors Industries / Eugene M. Isenberg
490 / Yahoo / Terry S. Semel
481 / Cendant / Henry R. Silverman
469 / Unitedhealth Group / William W. McGuire
457 / Lehman Brothers Holdings / Richard S. Fuld, Jr.
454 / Dell / Michael S. Dell
452 / NVR / Dwight C. Schar
448 / United Technologies / George David
437 / Qualcomm / Irwin Mark Jacobs
430 / Fidelity National / William P. Foley, II
393 / Cisco Systems / John T. Chambers
386 / Forest Laboratories / Howard Solomon
361 / Citigroup / Sanford I. Weill
358 / Starbucks / Howard D. Schultz
358 / Colgate-Palmolive / Reuben Mark
351 / XTO Energy / Bob R. Simpson
342 / Target / Robert J. Ulrich
332 / Freeport-Mcmoran Corp / James R. Moffett
332 / Chesapeake Energy / Aubrey K. McClendon
I found it somewhat amusing that the compensation column had to be tabulated in “millions” and there’s are still even 4-digit entries in there. Yes, people made over a Billion Dollars in a decade. Here are my thoughts on a few leaders that jumped out at me from the list:
- Larry Ellison– Of course, starting with the #1 slot, Larry Ellison has to be addressed. Oracle returned about 3X for shareholders during the decade which is more than can be said for most stocks, including the market at large. But his paycheck was off the wall – even outpacing most of the pack of the 24 highest paid CEOs during the decade. While the company performance was very good, not so sure the “total comp/return for shareholders” ratio sits right with me.
- Barry Diller– Next, Barry Diller actually LOST money for shareholders during the decade, yet he reaped over a Billion dollars. Definite downer.
- Steve Jobs– Who doesn’t love Steve Jobs? I haven’t met many who are willing to admit as much in public. He’s a good guy, saved the company and turned it into a behemoth that excluding the developing antenna-gate, actually develops good quality products that people like which is rare these days. For shareholders, he was the man. Apple returned 11X on an investment going back to the start of the decade. And he beat cancer to boot. So, his pay was high, but comparatively speaking (since a mere mortal can’t relate to ANY of these salaries), he earned his pay much more than most of this cohort.
- Coutrywide– Mozilo failed in epic proportion by giving a mortgage to anyone with a pulse and the company pretty much tumbled to dirt until being acquired during the financial collapse. Even in light of the huge runup earlier in the decade, shares were snatched up for a pittance and over the decade, Countrywide shares lost money for investors.
- Lehman Brothers– Hers’s another one. Fuld earned half a billion, yet the shares lost 99% over the course of the decade. Talk about a bad deal!?!
- XTO Energy– This was one of the surprises for me, as I never invested in them and hear about XTO only sporadically in the press. XTO returned 35X for shareholders during the decade. That’s like the fabled Microsoft of the 80s type return. Given that type of performance, the CEO belongs on the list.
Overall, there’s always the argument that anyone making this type of money is so grossly overpaid that it’s nauseating, etc., but conversely, there’s the ROI factor, which is that they’re just earning money in proportion to the performance of the company. If you want crappy performance out of a company and you’re OK with the best talent leaving for someone else that will pay “market rate”, then you can pay your CEO less. Sure, there are examples of modest pay structures for say, the CEO of Costco, but those are anecdotes. In general, these are people tasked with overseeing multi-billion dollar conglomerates that basically give up their lives for decades to run a company. Sports start make this kind of money and don’t actually contribute anything to society other than entertainment. So, it’s all relative – seems ridiculous, but this is a how a free market rewards success (or incompetence as about 1/4 of the list demonstrates).
What’s Your Opinion on “The List”?