CEO Pay

In the United States, CEO pay has come up in protests and in the media. The debate on this topic is sometimes diverted to that CEO pay is competitive with other companies and these are the job creators of our country. Let's put some perspective on how much corporations pay their CEOs and how this compensation is decided.

A full time employee (40 hours per week, 52 weeks a year) at the national minimum wage ($7.25/hr), makes $15,080 annually before taxes. Stephen J Hemsley, CEO of United Health, was the #1 earning CEO in 2011 according to Forbes.com at $101.96 million annual salary. How long does Stephen Hemsley have to work to make a full year minimum wage annual salary? 18 Minutes 27 Seconds.

Let's look at another viewpoint. How many minimum wage employees does this equal? 6,761 Employees. Keep in mind that this is Mr. Hemsley's personal compensation, not company earnings that are used to create jobs.

This amount of compensation is not uncommon. The top 50 CEOs make $19.94 million a year and up. Number 50, Philippe P Dauman of Viacom, at $19.94 million a year has to work 1 Hour 34 Minutes and 23 Seconds to make a year of minimum wage salary.

The reason that the compensation for the Chief Executive Officer of a company is so much is because of who decides the compensation. The compensation of a CEO is decided by the Board of the corporation, who are usually employees of the company. While many will argue that the CEO has no influence on this decision, this setup is a "I'll scratch your back if you scratch mine" situation. The wages of the employees on the Board is influenced by the CEO, and therefore to avoid backlash in their pay they are generous in deciding the compensation of the CEO.

The Occupy Wall Street protests across the nation have mentioned this as one of their items that are protested against. CEO pay can be addressed without government involvement, but it starts with acknowledging the gap in pay and working together to find solutions that both sides can agree.


Work for #1 CEO Values:
Minimum Wage: 7.25x40x52 = 15,080/yr
Stephen Hemsley: 101,960,000/(52*40) = 49019.2308/hr

15,080/49019.238 = 0.30763437 hours = 18 min 27 sec



Sources:
CEO Pay: http://www.forbes.com/lists/2011/12/ceo-compensation-11_land.html
Minimum Wage: http://www.dol.gov/dol/topic/wages/minimumwage.htm