This week an unapologetic Lee Raymond, Exxon’s former CEO, defended his headline making pay — including his $98 million pension. He said , “I’ve never had a conversation in my whole career with anybody about my compensation. It just doesn’t happen.”
Raymond added, “The philosophy of the company has been when the company does well, the shareholders do well and the employees should do well.”
One man, United Health Care’s William McGuire, could be America’s first billion dollar CEO. Some of his stock options, granted at low points in the company’s share price, came with the potential for maximum profit when the stock rose.
“I’ve been very fortunate and responsive to how well this company has performed on behalf of the people there,” McGuire says.
Though both Exxon and United Health prospered — and so did their shareholders under Raymond and McGuire’s leadership — some still see their huge compensation packages as CEO pay run amok.
One critic is Harvard’s Rakesh Khurana. “We’ve seen in the cases of Exxon for example, that the compensation of CEO is largely being determined by events that are outside of CEO’s control in this case the price for oil,” Khurana says.
Those who determine the CEO’s pay, the board of directors, are all too often people chosen by the CEO. Executive compensation consultant Jan Koors says it is also influenced by what the market will pay.
“There are a limited number of people that can do this,” Koors says, “They’re like the baseball player that can hit a 90 mile an hour fastball. Those guys can make a lot of money too, because there aren’t a lot of people that have that ability.”
But this year the rate of pay has slowed. Shareholder Advocates, the corporate library, says CEO packages went up by a median of 11.3 percent last year, compared to 30 percent the year before.
Though the growth rate has slowed, the outrage remains, with the average CEO taking home 431 times what the average worker does.