LABJ FORUM: Is it Time for a Pay Cut?
William J. McDonough, president of the New York Federal Reserve Bank and a possible successor to Fed Chairman Alan Greenspan, called on corporate executives to cut their compensation, saying rising executive pay reflects “terribly bad social policy and perhaps even bad morals.” So the Business Journal asks: Do you think top corporate executives should reduce their compensation?
Ed Rosenthal
Vice President of Investments
Grubb & Ellis Co.
I agree with him 100 percent. In the past, top executives earned 50 times the average worker, now it’s 500 times, and it’s really not fair. I don’t think it’s necessary for efficiency and motivation. You don’t need that to attract talent and it’s very unfair to people that are in the lower salary and wage echelon. It’s especially not justified when a company doesn’t make money. If they’re going to pay these outrageous salaries, it should be tied to production, just like a real estate broker. We don’t earn money unless we produce.
Peter Italiano
Assistant Director of Asset Services
Cushman & Wakefield Inc.
There should be a balance of equities within the company, where the executives, including middle and senior management, should be compensated by the skill set they bring to the table. Having said that, the level of compensation for some executives may be over the top, and for many executives of private companies, we’ll never know what their compensation is. It should be a case-by-case situation.
Andranik Tutuyan
Analyst
Buxbaum Group
Yes. If you compare the U.S. to Europe and other industrialized countries, the ratio of labor costs to executive salaries is higher in other countries. If the high compensation is due to an option package, I don’t think it’s bad social policy or morals. But if it’s purely payroll, it is.
Robin Paterson
Senior Vice President
American Business Bank
If a company is not performing and management hasn’t been able to turn that around, then the top dogs should be reviewed. You have to look at every expense, and executive pay is a big part of it. If the company and management have been performing well, then the salaries are justified. Are you getting the best bank for you buck? That’s basically what it comes down to.
Maureen Gorsen
Partner
Weston Benshoof Rochefort Rubalcava & MacCuish
I have to say I agree. The disparities are just grossly disproportionate. It’s hard to tell what there doing and how it affects the corporate bottom line. Maybe when a Jack Welch or a Lee Iacocca essentially becomes the brand, that’s what justifies the value. Otherwise it affects the morale of everyone who reads what these corporate executives are making.
Alan Klein
President
Los Angeles Magazine
Absolutely not. I believe that the compensation of any employee at a company whose performance is measured based on the operating results of the company should be tied more to performance. But I don’t believe that all CEO’s compensation packages should be automatically slashed.