Mike Kueber's Blog

July 8, 2012

CEO pay in San Antonio

Filed under: Business — Mike Kueber @ 4:43 am
Tags: ,

An article in Saturday’s Express-News reported that the average pay of 45 San Antonio-based CEOs and next-in-command went up 81% in 2011, from $47.6 million to $86.5 million. .  That increase is misleadingly large because the #1 CEO on the list, A. Lanham Napier of Rackspace, received an increase of 2,319%, going from $740,000 in 2010 to $17.9 million in 2011, with almost all of that increase due to Rackspace stock going through the roof in 2011.  In fact, most of the increase to other CEO’s was also due to increases in stock value. 

An accompanying article in the Express-News reported that the CEO of USAA, which is not a publically-traded company that is required to disclose CEO pay, had received $6.37 million in 2011 compensation from USAA’s P&C insurance companies according to a report filed with the Nebraska Department of Insurance.  The CEO’s pay from other income-producing USAA companies, like the USAA bank and investment-management company, can only be speculated on.   By itself, the pay of the USAA CEO from the P&C insurance company would have placed him 5th on the top-paid list, behind Rackspace’s Napier, Tesoro’s Goff, Valero’s Klesse, and Cullen/Frost’s Evans.

The amount of CEO, which some characterize as exorbitant or scandalous, pay raises at least two issues:

  • Should it be heavily influenced by a company’s stock price?  Although the stockholders might think there is a strong connection between stock price and CEO performance, I believe that stock prices are often subject to the aphorism that a rising tide floats all boats – i.e., when the overall market goes up, there is a strong probability that the stock prices of most individual companies will also go up.  Thus, it makes more sense to me to evaluate CEO performance by comparing the changing stock price of their company to the stock price of its competitors.  But from a broad perspective, I think that connecting CEO compensation to stock prices is a good idea.
  • Should CEOs be paid such high multiples of average-employee compensation?  Based upon numerous reports, we know that CEO pay in America has grown much faster than average-employee compensation.  The underlying question is whether this inequitable compensation makes sense in the free market, or is the market not functioning properly because the corporate masters (senior executives and the corporate boards) are conspiring to inflate their compensation? 

Although I am loathe to mess with the free market, I am prepared to accept the government interjecting itself to encourage CEO compensation that is relatively more equitable.  A simple means to effect more equity would be to require that stockholders approve executive pay.  I suspect that the corporate stockholders would not have approved the multi-million dollar compensation packages routinely awarded to the CEOs of the larger corporations.

President Obama is paid $400,000 a year, and I suspect that few CEOs would be paid more than that.  That sounds like a more sensible world than the one we live in now.


1 Comment »

  1. You try operating a Billion-dollar business…17 million is a drop in the bucket, considering progression, overall presence, & numbers. Numbers don’t lie.

    Comment by Ryan H — December 17, 2012 @ 3:56 am | Reply

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