Are CEOs really overpaid?

In the aftermath of the abrupt firing of Harry Stonecipher (shown here) as Boeing’s CEO, it’s time to revisit the question of whether CEOs are too lavishly compensated. Those of you who read the racier bits of the business pages will recall that Stonecipher was fired this month when it came to light that he was having an affair with a female employee of the company. An article in The Economist (headlined “The end of the office affair?”) contrasted Stonecipher’s fate with past practice in the corporate world: “Gone are the days,” the article says, “when a board considered such matters none of its business, as Citibank’s did in 1991 when its boss, John Reed, became the talk of Wall Street for having an affair with a stewardess on Citi’s corporate jet.” Being the corporate alpha male used to mean you could have affairs with any number of highly attractive partners—and get away with it. Nowadays, as l’affaire Stonecipher reminds us, the boss is more constrained in this respect than the guy in the mailroom. For that matter, the whole culture of deference toward CEOs has eroded. The clueless CEO is now a stock figure in commercials. And angry shareholders have joined forces with angry populists to take potshots at the big fella. Looking at executive compensation in the broadest sense, then, we must conclude that the non-monetary rewards of being a CEO have declined drastically in the past couple of decades. Under the circumstances, surely it’s no more than fair that the financial rewards of the job have been adjusted upwards.

—Posted by Mark Dolliver

Photo: Boeing

March 15, 2005 | Permalink