Executive Compensation - How Much to Too Much

Written by The Dividend Guy on April 18, 2006

All over the papers these last few days has been the compensation amount for retired CEO Lee Raymond. Raymond will receive a pay package of nearly $400 million. Part of this package includes access to the executive jet, a car and driver, and some consulting gigs. The question is, is this too much and how do we define too much.

Without knowing much of the facts, the average person is simply going to look at the newspaper headline and react instantly by saying there is no one worth being paid $400 million. That is outrageous. Many of the watchdog and shareowners rights groups are also crying foul, saying that Raymond does not deserve this.

I must admit, I find the $400 million payday a little overwhelming. However, I am in no position to comment as to whether this is excessive or not. The company did earn a profit of $36 billion last year - billion, not million - in profit. I think the real comparison would come from what all the other people within the company received - was it way out of whack or was it relatively in line. Unfortunately I have been unable to uncover these numbers so I will not be able to tell.

The only thing I can say is, at least the company did not lose $36 billion and they still paid him $400 million. The problem is that it happens…regularly.


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2 Comments so far

  1. Sox First April 19, 2006 1:14 pm

    Raymond’s payout might not be as bad as what some of his peers have received but it’s still outrageous. Exxon Mobil’s performance over the last two years is the result of soaring fuel and commodity prices, not management brilliance. And it comes at a time when investors are feeling less prosperous because of what they are paying at the fuel pump. Read about that at http://www.soxfirst.com/50226711/exxon_payout_nice_work_if_you_can_get_it.php

  2. » Carnival of Personal Finance #46 » Consumerism Commentary: A Blog About Personal Finance April 30, 2006 9:52 pm

    […] The Dividend Guy asks, How much executive compensation is too much? You can react to newspaper headlines, or you can look at the underlying data. TDG suggests looking deeper at the numbers to determine whether compensation is fair. (236 words.) […]

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