Reed Hastings, Netflix CEO
(Credit: Netflix)Reed Hastings, chief executive of video rental site Netflix, floated a ballsy proposal in Friday's New York Times, volunteering the idea that he and other highly paid wage earners ought to pay more in taxes.
Even if it's got a snowball's chance of going anywhere for now, the idea still merits consideration.
I'm the chief executive of a publicly traded company and, like my peers, I'm very highly paid. The difference between salaries like mine and those of average Americans creates a lot of tension, and I'd like to offer a suggestion:
President Obama should celebrate our success, rather than trying to shame us or cap our pay. But he should also take half of our huge earnings in taxes, instead of the current one-third.
Then, the next time a chief executive earns an eye-popping amount of money, we can cheer that half of it is going to pay for our soldiers, schools, and security. Higher taxes on huge pay days can finance opportunity for the next generation of Americans.
All this takes place against the backdrop of the president's proposal this week to put a $500,000 compensation limit on executives of companies seeking a bailout.
Hastings' proposal seeks to satisfy both sides of the debate over pay scales for executives overseeing companies that are bailout recipients. Writing about the compensation cap proposed by Obama, he had this to say:
It's a terrible idea. We all want the taxpayers' money returned, and capping compensation (for) bailout recipients will just make it that much harder for those boards to hire and hold on to the executives who can lead their companies to compete and thrive.
Perhaps a starting place for "tax, not shame" would be creating a top federal marginal tax rate of 50 percent on all income above $1 million per year. Some will tell you that would reduce the incentive to earn, but I don't see that as likely. Besides, half of a giant compensation package is still pretty huge, and most of our motivation is the sheer challenge of the job, anyway.
That last clause is beyond contestation. The thrill of being the boss is a huge motivation. The gluttons being outed on Wall Street are a class unto themselves.
Silicon Valley marches to a different beat. You'll find the occasional carpetbaggers--during the dot-com bubble, they were all over the place--but most hung out a shingle in order to create something new and exciting.
Don't get me wrong. Many of these folks take home enormous compensation packages. But we're talking about real bonuses in return for real performance. I think that Obama's jumping mad because the financial fat cats were taking home real bonuses for fictional profits. There's a big difference.
I give Netflix's boss credit for trying to refocus the debate. Of course, no technology firms have lined up at the trough to receive public funds. So at this stage, at least, the idea remains theoretical--that is, barring the (unlikely) economic collapse of the tech industry as well.
And here I thought that court sycophancy died out with the demise of the ancient regime.
Just another working stiff.
In Forbes' annual list of top executive salaries, Oracle's Larry Ellison finished in first place, with total 2007 compensation at $192.9 million. I'm sure it's good to be the king. But just in case any jealous serfs are asking why this mere mortal is worth such a royal sum, here comes journalist Sarah Lacy to remind us Ellison "deserves to be one of the most highly paid CEOs in the Valley."
That might have been a good point of departure for a more searching conversation on wealth and power in America or a discussion about how society divides up its spoils. Instead, the post skims the surface. Lacy writes that "Ellison gets where software is going" and that "he also gets where the technology business is going." Gee, with those credentials, I guess Oracle's board was guilty of short-changing its CEO.
More seriously, Ellison deserves fair compensation for his labors over the years. Of course, if you ask a dozen compensation experts what "fair" means, you'll wind up with a dozen different answers. Boring blather about whether Ellison's a sweetheart or someone who kicks pussycats is irrelevant. There's a statistical benchmark to measure the CEO of a publicly traded company. So I went back in time to how Oracle's shares fared over the last decade in two-year increments.
• May 4, 1998: $26.31
• May 4, 2000: $37.12
• May 3, 2002: $8.43
• May 4, 2004: $11.35
• May 3, 2006: $14.32
• May 3, 2008: $21.50
Not the most impressive stock performance in memory. Of course, the intervening 10 years were marked by the dot-com bubble burst as well as the subsequent recession. But when the economy recovered, so did the stock market. Judge Oracle's performance for what it is over the course of the last decade, but is the CEO really worth $192.9 million? You tell me.
***
Update: Judging from the feedback, I'm a moron for not noting stock adjustment & dividend announcements prior to the bubble. At the risk of again letting the trolls change the subject, I ask again: Is Ellison worth nearly $193 million for the job turned in over the course of last year? I must have missed it when Oracle shares broke triple digits in 2007. Wait, they didn't? No kidding. 'I'm still rubbing my eyes in disbelief at anyone who thinks that this incredible compensation package makes sense based upon the company's performance. If some folks still want to make that claim, whatever. There is no shortage of suck-ups to corporate greed. Anyway, I'm moving on.
- prev
- 1
- next
