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The boss has always made a bundle. In 1940, U.S. corporations paid their chief executives 48 times as much as the average worker, on average. No small gap.
But that doesn't come close to today's great pay divide. CEOs earned $11.3 million on average last year, a 27% increase from the prior year and a huge 262 times more than the average worker. Barry Diller, the chairman and chief executive of the IAC/InterActiveCorp (IACI, news, msgs), took home $295 million last year, including pay, bonus and options cashed in, according to the Corporate Library.
What's worse? The CEOs don't seem to see anything wrong with that type of compensation. Diller recently said critics of his pay and similar packages are "birdbrains."
The momentum of CEO pay, obviously, isn't headed in the right direction. But you don't have to be a Democrat to appreciate that the party about to take power may give the little guy a bit more say in how much the big guy gets paid.
In a minute, I'll give you a set of four steps you can take to help get executive compensation back under control. First, another quick look at why such action is needed.
According to the Corporate Library, a corporate governance research firm, here's what the five highest-paid CEOs made last year:
1. IAC/InterActiveCorp's Diller got $295 million.
2. Capital One Financial (COF, news, msgs) CEO Richard Fairbank got $249 million by cashing in options.
3. Nabors Industries (NBR, news, msgs) CEO Eugene Isenberg got $203 million in pay, bonus, cashed-in options and restricted stock.
4. Yahoo (YHOO, news, msgs) CEO Terry Semel pocketed $183 million in pay, cashed-in options and restricted stock.
5. KB Home (KBH, news, msgs) chief Bruce Karaz got $156 million in pay, bonus, cashed-in options, restricted stock and incentive grants.
If these kinds of giveaways to CEOs tick you off, you don't have to just sit and fume about it.
Congress, regulators and companies themselves are considering a slate of reforms that would go a long way to correct the problem -- and you can take several concrete steps to support these changes.
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Here's a list of whom to contact (click a name to send an e-mail):
- SEC Chairman Christopher Cox's office. (Click the name to send an e-mail to Cox.)
- Rep. Barney Frank, D-Mass., who will chair the House Committee on Financial Services, and Sen. Chris Dodd, D-Conn., who will head up the Senate Committee on Banking, Housing and Urban Affairs next year. (Please, e-mail MSN Money a copy of whatever you send to any member of Congress.)
And here's my quick list of reforms that you can try and do something about:
Boot the directors
The real culprits behind enormous salary increases for CEOs are boards that approve these egregious pay packages in the first place. So it's important to vote against board members on pay committees that let these bloated pay packages through. "Unless you boot off directors who agree to these outrageous pay plans, there is no way to stop it," says Nell Minow of the Corporate Library."Don't just discipline board members, change them," says Patrick McGurn, special counsel for Institutional Shareholder Services. Shareholders may soon get more power to do so -- but you'll need to support reform efforts aimed at getting greater "proxy access" for shareholders, as the reform effort is called.
The Securities and Exchange Commission recently sided with a company that rejected a shareholder proposal which would have given shareholders holding more than 3% of its shares the right to nominate board candidates. But a federal court has told the SEC to reconsider its ruling, which may give shareholders more say in policing boards that play too loose with corporate checkbooks.