Over the years, I've moved from left to right on most issues. But there are still some issues on which I'm with the left. One of them is executive pay. Yesterday the Wall Street Journal reported that, as the subhead put it, "Compensation Rises Again as CEOs Get Lavish Packages for Coming, Going or Staying" (sorry, subscription required). Here's the bottom line:
Total compensation for CEOs at 1,522 big U.S. companies rose a median of 30% last year to $2.4 million, double the 15% increase for 2003, according to researchers at The Corporate Library in Portland, Maine. The figure includes salary, bonus, restricted stock grants, gains from exercising options and payouts from long-term incentive plans.
I think I know all the arguments for high executive pay. CEO compensation is set in the free market, CEO performance can make a huge difference in a company's fortunes, and good performance can greatly benefit shareholders and employees, etc., etc. But I'm afraid there are just too many cases of poorly performing CEOs raking in huge bucks: a $50 million golden parachute for a fired CEO is sickening. And too often CEOs handpick and dominate the directors who determine their compensation. To all appearances, too many CEOs seem to be determining their own pay.
Of course, I'm against any proposals for government to control executive pay. And I'm not at all sure that shareholders can do much about itor should. But there is one class of people who can: CEOs themselves. And evidently, some of them do. Right next to the article on executive pay is another (subscription required again) headlined "A Few Share the Wealth." Here are the lead paragraphs:
Best Buy Co. Chief Executive Bradbury H. Anderson says he's "not trying to do a great thing," by declining hundreds of thousands of stock options and requesting they be distributed to lower-level workers at the biggest U.S. consumer-electronics retailer. "I'm just trying to do what's appropriate as a leader."
Nonetheless, Mr. Anderson's action stands out in a world of ever-rising executive compensation. The 56-year-old CEO, who started as a stereo salesman and rose though the ranks, has declined options each of the past three years. Those 934,000 options have gone into a pool from which roughly 2,400 Best Buy staffers most of them hourly retail workers have benefited.
Of course, Mr. Anderson can afford the sacrifice. He was paid about $1.1 million in salary last year, and received a bonus of $1.2 million. He also owns roughly 2.2 million Best Buy shares valued at $110 million.
If you want, you can be cynical about this. Anderson did after all take home $2.3 million last year, and he has huge wealth (though it will be diminished if Best Buy's share price falls). But listen to the testimony of one Best Buy employee:
In October 2004, Sabah Demian, a Best Buy cashier in Lakewood, Calif., learned she was granted 200 options from Mr. Anderson's cache. "Tears were in my eyes," she says. "He recognizes that people are working hard ... and this is not his company. It is our company, and he appreciates the job that we do."
I've shopped at Best Buy and have noticed that its employeesmostly young peopleare very knowledgeable and helpful. Now I know one reason why. Good for Bradbury Anderson. Someone should start a movement to encourage other CEOs to follow his example. At least some have: The Journal article cites Circuit City CEO W. Alan McCollough, CDW head John A. Edwardson, and former PepsiCo CEO Roger Enrico (who directed part of his salary into scholarships for children of lower-paid PepsiCo employees). As for me, I'm inclined to go over to Best Buy and buy something.