 |  |
 |
|
 |
|
|
BOB ABERNETHY, anchor: Now, a growing debate: How much should a chief executive be paid? Anything he or she can get? Or is there something morally wrong with $50 or $100 million salaries, especially when the value of a company's stock is going down? Some people of faith say wealth is a sign of God's blessing. Others say it's the root of all evil and that no one ever got to heaven by getting rich. Lucky Severson reports on the reasons some Americans are paid so much.
LUCKY SEVERSON: Tom Hanks gets more than $20 million for making a movie. That's because he has star quality -- and Oscars. Lots of people pay to see his films. The average major-league baseball player made more than $2 million last year. People will pay to see a ballplayer perform.
UNIDENTIFIED BALLPLAYER: If 40 million Americans could hit a 95-mile-an-hour fastball, we're not gonna get paid that much. But I'm blessed with something not everybody's able to do.
SEVERSON: Besides, a ballplayer's career may last only a few years. And sometimes the game is dangerous -- those 95-mile-an-hour fastballs. And what about corporate leaders -- those captains of commerce and industry? In the year 2000, the average CEO of a major corporation made more than 500 times the average factory employee. But is the CEO worth that much more than the workers? Is his contribution to the company that much greater?
Sister RUTH ROSENBAUM (Center for Reflection, Education and Action): We really need to look at profit as coming from the combined efforts of all those people. Now presuming the CEO to be the manager of all of that, certainly he or she should be receiving a just portion of that. But the imbalance that exists at the present time, I would say is without credibility.
SEVERSON: Sister Ruth Rosenbaum examines disparities of wealth and power for a faith-based research center.
Sister ROSENBAUM: I would describe it as being obscene. There has to be some limit as to how much someone is deemed worth.
SEVERSON: But in this country, at least, there apparently is no limit.
Steven Jobs is credited with saving Apple Computer, and in the year 2000, he paid himself only one dollar. But the board of directors gave him a pay package valued at $381 million. Last year, Larry Ellison, CEO of the Oracle Corporation, exercised stock options that netted him $706 million -- at a time when Oracle stock was dropping like a stone.
There are different ways of justifying what we pay someone. What is a person's worth to an organization? Their contribution to society? What does it take to get the most qualified people, giving their best performance in a competitive society? What works? And what's fair? And are they two different things?
Charles Fay has written extensively on compensation theory and practice.
CHARLES FAY (Rutgers University): There is fairness against the market -- that is, you get paid about what somebody else in your position would get paid by another organization. Secondly, the pay is related to your contribution to the organization, which parallels your place in the hierarchy. And third, [the pay] parallels your personal performance.
SEVERSON: William Niskanen is chairman of The Cato Institute, a free-market Washington think tank.
WILLIAM NISKANEN (The Cato Institute): I don't think we have any business passing judgment on how well other people do. That's -- one of the seven deadly sins is envy. And I think a lot of the concern about CEO salaries is little more than envy.
SEVERSON: How is any CEO worth $200 million? How is any human being worth $200 million a year?
Mr. NISKANEN: How is a great athlete or star performer in the movies or television -- how are they worth that much? Why do we single out CEOs in this case? All of us might aspire to be as good looking and as wealthy as Michael Jordan. That's, I think, none of our business as long as he acquires his wealth in ways that create value for other people. And I think we should judge CEOs by that same standard.
GRAEF CRYSTAL (Financial Consultant): I don't decry the pay of Tom Hanks or a major-league ballplayer. They're negotiating with people who don't want to pay 'em a lot of money, who will try every trick they can to get these people to work for less.
SEVERSON: Graef Crystal was one of the top pay consultants in the business world until he grew disillusioned with the close relationships between boards and CEOs.
Mr. CRYSTAL: Your standard-issue board consists of ten friends of the CEO. In effect, he can tell the board whatever he wants because the board is stuffed with his friends, or two thirds of the members of the board are CEOs of other companies and they don't come to the table with a philosophical predisposition toward low pay. On the contrary, they love high pay.
LUCKY SEVERSON: Tom Hanks gets more than $20 million for making a movie. That's because he has star quality -- and Oscars. Lots of people pay to see his films. The average major-league baseball player made more than $2 million last year. People will pay to see a ballplayer perform.
UNIDENTIFIED BALLPLAYER: If 40 million Americans could hit a 95-mile-an-hour fastball, we're not gonna get paid that much. But I'm blessed with something not everybody's able to do.SEVERSON: Besides, a ballplayer's career may last only a few years. And sometimes the game is dangerous -- those 95-mile-an-hour fastballs. And what about corporate leaders -- those captains of commerce and industry? In the year 2000, the average CEO of a major corporation made more than 500 times the average factory employee. But is the CEO worth that much more than the workers? Is his contribution to the company that much greater?
Sister RUTH ROSENBAUM (Center for Reflection, Education and Action): We really need to look at profit as coming from the combined efforts of all those people. Now presuming the CEO to be the manager of all of that, certainly he or she should be receiving a just portion of that. But the imbalance that exists at the present time, I would say is without credibility.
SEVERSON: Sister Ruth Rosenbaum examines disparities of wealth and power for a faith-based research center.
Sister ROSENBAUM: I would describe it as being obscene. There has to be some limit as to how much someone is deemed worth.SEVERSON: But in this country, at least, there apparently is no limit.
Steven Jobs is credited with saving Apple Computer, and in the year 2000, he paid himself only one dollar. But the board of directors gave him a pay package valued at $381 million. Last year, Larry Ellison, CEO of the Oracle Corporation, exercised stock options that netted him $706 million -- at a time when Oracle stock was dropping like a stone.
There are different ways of justifying what we pay someone. What is a person's worth to an organization? Their contribution to society? What does it take to get the most qualified people, giving their best performance in a competitive society? What works? And what's fair? And are they two different things?
Charles Fay has written extensively on compensation theory and practice.
CHARLES FAY (Rutgers University): There is fairness against the market -- that is, you get paid about what somebody else in your position would get paid by another organization. Secondly, the pay is related to your contribution to the organization, which parallels your place in the hierarchy. And third, [the pay] parallels your personal performance.SEVERSON: William Niskanen is chairman of The Cato Institute, a free-market Washington think tank.
WILLIAM NISKANEN (The Cato Institute): I don't think we have any business passing judgment on how well other people do. That's -- one of the seven deadly sins is envy. And I think a lot of the concern about CEO salaries is little more than envy.
SEVERSON: How is any CEO worth $200 million? How is any human being worth $200 million a year?
Mr. NISKANEN: How is a great athlete or star performer in the movies or television -- how are they worth that much? Why do we single out CEOs in this case? All of us might aspire to be as good looking and as wealthy as Michael Jordan. That's, I think, none of our business as long as he acquires his wealth in ways that create value for other people. And I think we should judge CEOs by that same standard.
GRAEF CRYSTAL (Financial Consultant): I don't decry the pay of Tom Hanks or a major-league ballplayer. They're negotiating with people who don't want to pay 'em a lot of money, who will try every trick they can to get these people to work for less.SEVERSON: Graef Crystal was one of the top pay consultants in the business world until he grew disillusioned with the close relationships between boards and CEOs.
Mr. CRYSTAL: Your standard-issue board consists of ten friends of the CEO. In effect, he can tell the board whatever he wants because the board is stuffed with his friends, or two thirds of the members of the board are CEOs of other companies and they don't come to the table with a philosophical predisposition toward low pay. On the contrary, they love high pay.
SEVERSON: Tax laws make it more attractive for boards of directors to compensate an executive with lots of stock options, instead of salary. That gives the CEO a strong incentive to make sure the stock price goes up. You might expect that CEOs are so highly paid because good ones are in short supply. But maybe they aren't.
Mr. NISKANEN: We reward all kinds of behavior in the United States. We have the world's highest paid athletes, we have the world's highest paid television newscasters, the world's highest paid movie stars and television actors, and so forth. That is a characteristic of a success-oriented culture.
Professor JOHN KINGDON (University of Michigan): We have a distinctive view of equality. We don't really think of equality as equality of result. We think of equality [as equality] of opportunity. And the idea is that in this land of opportunity, if you provide people with their opportunities to get rich, then it's fine if they do get rich.
Mr. CRYSTAL: The issue here is not going to be solved until the shareholders rise up and smite the boards of directors who don't do the right thing. That is to say, vote them out of office and throw them out into the street.
