How much will Microsoft pay its next CEO?

Microsoft CEO Steve Ballmer speaks to the press in Tokyo on May 23, 2013.

Microsoft is in the market for a new CEO. But at the same time, another report highlights the growing dissatisfaction with high levels of CEO pay. “Bailed out, Booted and Busted," the report issue today by the Institute for Policy Studies, says nearly 40 percent of the highest paid CEOs either led firms that received bail-out money, lost their jobs, or had to pay fraud- related fines after the financial crisis hit. But the show must go on.

When companies are hunting for a new CEO, first they make a budget, right? Well, no says Carol Bowie, head of research for the Americas with Institutional Shareholders Services. “Most boards, I would say, are willing to pay almost anything, if they think they’ve got the right person.”

Instead says Bowie, companies first decide who they want, and then go after them waving blank checks in the air like so much executive catnip.

Last year, says Bowie, the median level of CEO pay at large corporations like Apple, Exxon Mobil, and Hewlett Packard, was just over $22 million. And, it’s those big numbers for top executives which are increasingly evoking dissatisfaction among the rank and file. But Kevin Hallock, chair of the economics department at Cornell,  notes the risk can be worth it.

“Well, it must be,” he says, “because they keep doing it.”

For huge corporations with revenues in the billions, spending millions can make sense.

“Having the very, very best person, versus the person just below that person, might be worth two or five or eight million dollars more,” he says.

But we should focus, says Hallock, not just on amounts but how pay is given out. Like tying salary, and bonuses, to the success of the company. “For a non-profit, it’s saving the world,” says Hallock. “Whatever success means.

Or however many dollar signs it takes.

About the author

Sally Herships is a regular contributor to Marketplace.
Log in to post4 Comments

I believe the best way to pay top executives is the use of a deferred bonus structure which is based upon future profits of the company. Most boards think they need to throw money at these executives to retain them ......which by the way isn't true. There are many qualified executives out in the marketplace willing to take on the top position at a reduced salary in order to gain CEO experience. Many boards are just too lazy to conduct a long term search for good people.

I know a woman who works for a large retail chain (in the corporate office), whose CEO rakes in millions of dollars each year in salary and bonuses. She and her staff are in the process of laying off nearly 1000 low paid staff because the corporations stock is not doing as well as the BoD would like it to be doing. It seems that only one or two million of the dollars the CEO makes could cover the salaries of so many workers who actually need jobs to support their families.

The days of contentment are long past. Employees continue to face decreased wages and benefits, all while trying to contend with spiraling costs for everything. Making ends meet in 2013 is not easy for the under-appreciated and under-valued employee. More of the pie is going to top-heavy corporate executives. The balance of compensation which was more reasonable during the 1950's to 1970's is completely off kilter.

The unfortunate part about top heavy benefit structures is that regular people, employees are being taken for granted. Their value is considered negligible, and replaceable. The honor of the working people of America is being trashed. The workers of America are being pushed into a corner, and forced to compromise on vital subsistence, while the top tier executives are allowed to live like kings.

Success in America used to be shared by employees and employers when there was appreciation by each for each other.

With Generous Support From...