Wednesday, January 29, 2014


That Jamie Dimon got an $8M raise bringing his 2013 salary to $20M in the aftermath of JP Morgan’s shelling out billions to settle misdeeds is beside the point.  And that Dimon is charismatic or considered a star in the banking world is equally so.  Dimon is overpaid. Anyone who works, especially at a taxing job with considerable responsibility knows how hard that can be.  We understand that embedded in the idea of a career ladder is the expectation that the higher up we get, the more we will earn.  After all, the place relies on our leadership and the burden of performance is greater.  But $20M for a single year’s work — that’s about $55,000 a day assuming one works seven days a week, which we don’t.  Give us a break.

Dimon’s overly generous salary is hardly unique.  It actually pales in comparison with some of his fellow CEOs.  Before getting to that, I should note that because of the different ways companies report and analysts calculate (some include options, others don’t) it’s hard to get a consistent “apples to apples” handle on  compensation.  I am using and relying on listings compiled by Forbes Magazine and Bloomberg.  While some companies question their calculations (especially the treatment of stocks and options) both tabulations are well worth a look.  Check out the links.

Forbes, which closely follows the super-rich and super-compensated, listed McKesson’s John Hammergren as 2011’s top earner with a total take home of about $131M.  That’s right, $359K a day.  To be fair, without disputing the number, his company questions attributing all those earnings to a single year.  I won't get into that.  The important thing is that Forbes applies their methodology consistently.  Using it, they report that fifty-three other top executives were paid more than Dimon.  Interestingly, despite the conventional perception that Wall Streeters are raking in the most, drug and biotech CEOs actually take home 2.5 times as much as bankers.

To say that Mr. Dimon and his compatriots are overpaid is, in my view, a gross understatement.  Ask yourself, how much harder are they working than the multitude of women and men in their companies who come in daily, often putting in extra hours with no extra compensation?  Okay, Dimon may work harder than many and carry a heavier corporate burden, but $55,000 a day — more than most Americans earn in a year? Bloomberg may use a somewhat different methodology, but their calculation compares a CEO’s compensation with that of his/her company’s average wages.  Their listing is for 2012 when Hammergren’s take home seems to have fallen in to $40M ($110K at day), 733 times the McKesson’s average compensation of $54K.  This multiple calculation is revealing, often shocking.  Ron Johnson (whom JC Penny subsequently fired for poor performance) was earning highest take home of all company CEOs — 1,795 times more than Penny’s average employee.  Astounding.

And then there is the issue of pay raises, which have become so scarce or puny that we have generally seen wage stagnation.  In 2011, according to Forbes, “…the chief executives of the 500 biggest companies…got a collective pay raise of 16%...to $5.2 billion. This compares with a 3% pay raise for the average American worker.”  So not only are these executives earning many times more than employees, they are also getting much higher percentage pay raises.  You don’t have to be a genius mathematician to figure out that over the years this differential takes on a huge multiplier effect further exacerbating and widening income inequality.  These are important numbers because, while there is certainly a gap between the 1% and the poor, the overarching and crucial gap is between people at the top and the millions of working people below, often in the same companies.  Income inequality is stretching and often eliminating the middle class.  That touches virtually of us and in multiple ways.

Some people argue, and perhaps rightly so, that multibillion dollar fines imposed on Dimon’s bank notwithstanding, the government has not done enough to prosecute Wall Streets misdeeds.  But also true, and in some ways equally disturbing, is that bank directors have done little or nothing to hold upper management, especially CEOs, accountable.  If Washington is filled with lobbyists and office holders waiting to become lobbyists, and it is, management’s cronies generally populate and control corporate boards.  It is an incestuous relationship where the same directors sit on multiple boards and that includes CEOs.  It’s a buddy system. You sit on my board and I’ll be on yours. You watch my back and I’ll watch yours.  So, in what amounted to a gentle “slap on the wrist” for an arguably gross performance shortfall Dimon’s board reduced his 2012 pay to $12M (about $33K a day).  Wow, that really hurts!

Those 1-percenters, politicians and pundits who decry and classify talk of income inequality, as “class warfare” should be ashamed.  That anyone, for example, may question why (according to Bloomberg) CBS’s Les Moonves is making 1,111 times the salary of his company’s average employee, is not class warfare.  It’s looking at this glaring disparity and coming to the logical, and I’d argue objective, conclusion that there is something very wrong with this picture.  To put it bluntly, the compensation of many CEOs is an obscene manifestation of unfettered greed.  Don’t get me wrong.  CEOs should absolutely be making more than the average employee and even more than the senior executives on their team, but these numbers are simply and blatantly way out of any reasonable proportion.  It is hard to justify them and keep a straight face.

Of course, corporate directors and so-called compensation experts do justify them, which only shows how out of control and routine this money grab has become.  It seems that they, and those who have shrugged this inequity off as “just the way it is” have lost any and sense of values.  Shouldn’t there be some semblance of even-handedness in assessing an individual’s contribution and worth for a year’s work?  Again, I’m not suggesting that there shouldn’t be some premium, even a considerable but appropriate differential.  On Bloomberg’s charting of 250 CEOs pay ratios, William Sullivan of Agilent Technologies has the lowest, only 173x — $10M (27.4K a day) vs. employees averaging $58.6K.  Does that meet the smell test?

Calling our growing outrage about income inequality “class warfare” is a smokescreen.  If there is any war here, let’s be clear that it’s those at the top getting those huge payouts and their enablers who are well armed.  In a corporate setting, they hold all the cards.  They buy influence whether its the current PAC spending of the billionaire Koch brothers or the self-funding a Michael Bloomberg uses to thwart enacted term limits to gain an extra term as mayor of New York (not to mention the office itself).  They do what ordinary people — and that means most all of us — can’t.   Not only are they unwilling to let go, they fight tooth and nail to hold on, often with a good degree of arrogance.  Employees of their companies fear them and so do we.  Perhaps, like buying a lottery ticket, we don’t cry out because we hope, if they can do it, so can I.  But we know, or should know, for 99% of us that’s mostly an illusion.  It’s an American Dream that seems to be dimming with every passing year.

Singling out Jamie Dimon from a cohort that has collectively acted in much the same way — demanded and happily accepted more than their due — may seem unfair.  Don't' feel bad, I think he can handle the kitchen’s heat.  Dimon may be smart.  He may be well regarded on The Street, but he isn’t our hero and he certainly shouldn’t be our society’s role model.  American CEO’s may be doing good work, but I think they are grossly overpaid while most Americans are being left behind.

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