CEO Pay

Matthew Yglesias on CEO pay:

...two clear patterns emerge in CEO pay. One is that American executives get paid wildly more than do European executives to run basically comparable firms. Look at executive pay in the supermajor oil firms and it’s clear that nationality rather than business acumen is driving the differentials. The other big issue is that CEOs of newish companies, especially tech companies, tend to have much lower salaries. The issue, presumably, is that these guys are major stockholders in the firm. Steve Balmer is one of the richest men in America notwithstanding his low pay since Microsoft is a successful company. But if he were to pull a John Thain and render his company worthless through business blunders, he’d tumble down the list.

It seems fairly clear that European and Silicon Valley norms are healthier than those prevailing elsewhere in the United States. There’s no sign that major European multinationals are crippled by an inability to attract competent executives—the norms are just different and the European CEOs are happy to work for “mere” millions rather than tens of millions. The Silicon Valley model, meanwhile, does let people become incredibly wealthy. But not through “heads I win, tales you lose” bets where bonuses are handed out regardless of performance or through rigged stock option plays. It seems to me that we could have a much healthier corporate America with more Steve Ballmers and more Louis Galloises and fewer Jeffrey Rein’s.

Meanwhile, a decent society will maintain a hefty tax on very large estates. That way we ensure that the Ballmers of the world are encouraged to leave behind generously financed foundations rather than the next generation of Paris Hiltons.