Paying People Too Much – A US Problem

Introduction

The New York Times just published its annual report on executive pay. It is a regular reminder of just how out of line US income policies are relative to those in other developed nations. A summary of their results are presented in Table 1.

Table 1. – Compensation of Highest Paid US Chief Executives

Source: New York Times, May 27, 2018

And while chief executives are among the highest-paid people in the country, they are not alone in enjoying lavish pay. For example, consider entertainers. In Table 2 some of the musical performers charging the most for appearances are listed.

Table 2. – Leading Performer Appearance Fees

Source: priceonomics.com

Table 3 lists US professional athletes who make the most.

Table 3. – Leading Professional Athletes’ Pay

Source: Various

The following chart lists the average salaries of professional athletes globally. Cricket players in India make a lot. Note also the distinction between “Gridiron Football” and “Football” (Soccer).

Overall, US Chief Executives get an average annual compensation of $183,000. For those in the Equilar study, the average was $15.7 million.

But some get paid a lot more than any of those covered above. I quote from the New York Times piece referenced earlier:

“David T. Hamamoto, a former C.E.O. who until January was the executive vice chairman of Colony Northstar, a real estate company, was awarded $53 million last year. Larry Ellison, the founder, chairman and chief technology officer of Oracle, was awarded $41.3 million, adding to his net worth of some $57 billion.

Financiers at hedge funds, which are generally private and not included in the Equilar study, can earn billions of dollars a year. Michael Platt, the founder of BlueCrest Capital Management, earned $2 billion last year, according to Forbes. James Simons, a founder of Renaissance Technologies, earned $1.8 billion.

 And two technology entrepreneurs who last year took their companies public were awarded generous pay packages, but were not included on the list because they did not file proxy statements, which is part of Equilar’s methodology.

 Evan Spiegel, a co-founder and the chief executive of Snap, received a stock award worth $636.6 million in connection with the company’s initial public offering. And the Dropbox co-founder and chief executive Drew Houston was awarded a performance-based grant worth about $110 million.”

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Disclosure: None.

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