Friday, November 10, 2006

Executive Compensation Excess: Exhibit A

BarrydillerI know there are a hundred and three reasons why corporate executives deserve every penny of their exorbiant salaries, but this following opinion piece by Nicholas Kristof of the New York Times about Barry Diller establishes that you can get paid an awful lot even when your company is not doing very well:

Last year, Barry Diller took home a pay package worth $469 million, making him the highest-paid chief executive in America.

His shareholders didn’t do so well. Stock in the main company he runs, IAC/Interactive, declined 7.7 percent last year. For the three years ending in December 2005, the stock was up just 11 percent — compared with 49 percent for the S. & P. 500.

There’s nothing wrong, in principle, with a big pay package. Baseball players, movie stars and investment bankers often get outrageous pay, but after arms-length negotiations. That is capitalism at work, and nobody is getting ripped off.

In contrast, as John Kenneth Galbraith once noted: “The salary of the chief executive of the large corporation is not a market award for achievement. It is frequently in the nature of a warm personal gesture by the individual to himself.”

IAC . . . said that the package was necessary to “motivate Mr. Diller for the future.” Goodness, this man needs a lot of motivation! He required about $150,000 every hour just to get motivated — suggesting that he may be the laziest man in America.

Take home quote: "The average C.E.O. earns 369 times as much as the average worker, compared with 36 times as much back in 1976."


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