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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.

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