Creative remuneration means execs paid more than CEOs

Figures reveal many executives earn more than their CEOs. Are we surprised?

 
Author: Rita Lobo
November 18, 2013
Rita Lobo

Traditionally, CEOs have been the highest earning people in an organisation. They do have the most responsibility, after all, and often the most exposure. However, new figures compiled by Business Insider from data available at FindTheCompany has revealed that a surprising number of non-C-suite executives and managers are paid more than CEOs in some of the biggest companies in the world.

Executive pay has been in the media spotlight over the past few years, especially since the onset of the global financial crisis. There has been a lot of pressure on major companies, particularly in Europe, to curb what has been perceived as excessive pay to undeserving executives. But many have argued just the opposite; companies need to continue offering competitive pay to senior executives in order to attract the highest standard of talent to stave off future crashes or withstand on-going economic turmoil.

US-based AFL-CIO, a national trade union centre, has concluded that CEOs of S&P 500 Index corporations make on average 354 times the average wages of rank-and-file US workers, as of 2012. In Britain, CEOs make more than 84 times the average worker compensation, less drastic than in the US, but still very high. Which is why it comes as something of a surprise that there are executives out there that earn considerably more attractive pay packages than much-reviled CEOs.

Interestingly, the figures revealed by Business Insider and FindTheCompany reveal that some of the highest paid executives are not the CEOs but behind-the-scenes execs that often do not make it into the business pages of international newspapers. That is certainly the case of Robert Mansfield, a long-serving Apple employee who used to be vice-president of technologies, and now works on ‘special projects’. It was widely reported that when Mansfield announced his retirement in 2012, Tim Cook was faced with a quasi-mutiny in the tech department that forced him to offer Mansfield a very juicy package to delay his departure. In 2012 the ‘special projects’ man earned $85.5m, the second highest executive on the S&P 500 list, and close to $80m more than Cook himself, who famously had a 99 percent pay-drop between 2011 and 2012.

But while the pay-gap between Cook and Mansfield is considerable, it is generated by a difference in the number of shares each of them owns. But Jeffrey A Wilke, senior vice-president of consumer business at Amazon, earns a staggering $16m more than founder and CEO Jeff Bezos. Consumer operations are a vital part of Amazon operations and Wilke, who joined the company in 1999, has been busy streamlining the process. The pay gap between himself and Bezos might be due to the fact that the CEO has not had his base-pay rate reviewed since the company went public in 1998 and is not compensated for his role as company director, making him one of the lowest paid CEOs of a major corporation in the world. Bezos does, however, have many billions of dollars worth of Amazon shares to content himself with, so overall, he is probably still better off than Wilke.

The pay-discrepancy between CEOs and other executives, while somewhat startling at first glance, is only a reflection of how complicated pay-structures have become over the years. In fact, reward systems in companies of this scale have long-since evolved past simple salary-plus-benefits models and are increasingly performance-focused.

Because of the controversies surrounding executive pay companies are opting for shares-based bonuses to top up executive salaries, which could explain why some long-serving employees take more home than CEOs.  And overall, awarding shares in lieu of cash bonuses is also a performance incentive: the better the company does, the better employees do.

It should not be surprising that there are valued executives out there that do jobs that are just as vital for the running of a multinational business as the CEO, and we would do well to remember that a CEO is also a cog, albeit a crucial one, in the complex machinery that is a corporation.