New Report Condemns Trends in CEO Compensation

Institute for Policy Studies studies the contrast between company performance and CEO pay.

Institute for Policy Studies studies the contrast between company performance and CEO pay
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Under CEO Larry Ellison's watch, the technology company Oracle paid nearly $200 million to resolve allegations that it overcharged the federal government. That amount, however, pales in comparison to the compensation Ellison has taken home for his work at Oracle.

Between 1993 and 2012, Ellison earned roughly $1.8 billion, which averages out to more than $29,000 per hour, according to data compiled by the Institute for Policy Studies. In a recent report, the IPS examined the compensation of Ellison and hundreds of other CEOs and found that a surprising number of them took home some of the highest salaries in the business world despite having major stains on their records.

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"[O]ur analysis reveals widespread poor performance within America's elite CEO circles. Chief executives performing poorly – and blatantly so – have consistently populated the ranks of our nation's top-paid CEOs over the last two decades," the report, entitled "Bailed Out, Booted, Busted: A 20-Year Review of America's Top-Paid CEOs," observes.

The report looks at all CEOs who have finished at least one year in the 20-year period between 1993 and 2012 as one of the top 25 highest-paid CEOs in the country. A total of 241 CEOs met that criterion. When CEOs are counted multiple times if they appeared on the list in more than one year, that leads to a total of 500 data points (25 per year over the course of 20 years).

The IPS concluded that 38 percent of those 500 slots were occupied by CEOs who fell into at least one of three categories: their companies were bailed out either on their watch or shortly after they left, they were forced out of their jobs or their companies were embroiled in costly disputes over corporate malfeasance.

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The report, which amounts to a blistering critique of executive compensation, focuses largely on the contrast between company performance and CEO compensation. For instance, it notes that the companies led by the CEOs on the list received a combined $258 billion in taxpayer-funded bailouts in the aftermath of the 2008 recession. Meanwhile, 18 companies with a CEO on the list paid more than $100 million each in "fraud-related fines and settlements."

The IPS also criticizes the expanding compensation gap between CEOs and the rest of society. "The pay gap between large company chief executives and average American workers has grown from 195-to-1 in 1993 to 354-to-1 in 2012," the report notes. "Two decades have essentially recalibrated our nation's moral sensibilities. The outrageous has become the everyday."

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Finally, the report takes aim at what the IPS considers to be regulatory failures in the field of executive compensation. "The most widely heralded CEO pay reforms – most notably, advisory shareholder say on pay – have so far done little to slow the executive pay march," it contends. "We need stronger approaches to reform."

Although Congress attempted to improve transparency about executive pay when it passed financial reform in 2010, that effort has, according to the report, fallen short. "[The] reform has gone totally unenforced," the report argues.