CEO Pay: Why Not More Outrage Over Other Highly Paid People?

Why do so many of us get so bent out of shape about CEO compensation, but not about that of other relatively highly paid people?

That is the central question explored by Cornell University’s Kevin Hallock in his December Workspan column Research for the Real World, where he compares the growth in pay at the 95th percentile (top 5 percent) for CEOs and average U.S. workers to that of athletes in Major League Baseball, the National Basketball Association, the National Football League and the National Hockey League.

From 1995 to 2010, pay for this group of U.S. workers grew 69 percent while pay for the CEO group increased by 240 percent (one of those statistic that often provokes outrage).

Why no uproar over athletes and entertainers?

But pay for top NBA athletes also grew by 240 percent during that period, and top paid athletes from the other major sports is shown as growing at rates substantially above the U.S. worker (with the 95th percentiles of pay for the NFL, MLB and NHL players rising 200 percent, 175 percent and 125 percent respectively).

Why don’t we hear comparable cries of outrage over those stats?

There are other fields of endeavor beyond business and sports where people are highly paid, and where the gap between average and top earners is similarly wide. As examples of this, we can consider some of the figures that Forbes provides us for top earners in acting, writing and music.

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  • Tom Cruise, as the top paid actor on the Forbes list, earned an estimated $75 million in 2011. His female counterpart, Kristin Stewart of Twilight fame, earned an estimated $35 million.
  • The two highest paid authors, James Patterson and Stephen King, earned a healthy $94 million and $39 million, respectively.
  • In music, Sir Elton John topped the list at $100 million, with Lady Gaga close behind him at an estimated $90 million.

This when plenty of actors, writers and musicians are earning practically nothing.Why do we find the high pay of one group of workers — CEOs — so much more inflammatory than the high pay of others?

Kevin Hallock shares a few potential hypotheses in his column. Could it be that CEO salaries are simply better known and more widely reported? Is it because most people have a clear sense of the limits of their own athletic (or acting, writing or musical) abilities, where the “gifts and talents” a top executive brings to the table are harder for most of us to discern and appreciate?

What’s your take?

This was originally published on Ann Bares’ Compensation Force blog.

Ann Bares is the Managing Partner of Altura Consulting Group. She has over 20 years of experience consulting in compensation and performance management and has worked with a variety of organizations in auditing, designing and implementing executive compensation plans, base salary structures, variable and incentive compensation programs, sales compensation programs, and performance management systems.

Her clients have included public and privately held businesses, both for-profit and not-for-profit organizations, early stage entrepreneurial organizations and larger established companies. Ann also teaches at the University of Minnesota and Concordia University.

Contact her at abares@alturaconsultinggroup.com.

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3 Comments on “CEO Pay: Why Not More Outrage Over Other Highly Paid People?

  1. Ann — good article. I think there a few reasons why high paid executives get us steamed more than actors, sports figures, musicians, etc.
    1) Actors, sports figures, etc. entertaiin us. They do not affect our lives like executives do. They don’t have “control” over us or our livelihood. So we don’t think as much about their pay. We watch them in a movie or game or concert —- then leave. All over.
    2) Sports figures usually get out of the job early in life — maybe 35ish? So you can rationalize that they are making more money to make up for the short career.
    3) Executive pay —- to a lot of people they are “above the law”. Pay-for-performance is for the masses — but not for them. Employees get laid off — at the same time that executives get big bonuses. How can that be justified when the company is hurting financially is the feeling. And if they do get fired they walk off with multi-million dollar severance pay. They have real day-to-day impact on our lives, livelihood — and that impacts everything — family, home, kids, etc.
    I think those are the main reasons.
    The real thing that “chaps” me is the big difference between pay for entertainers/sports figures and our teachers. That is the real outrage to me.

  2. Ann: I’ve been saying this for years. Thanks for writing about it. I wouldn’t be caught dead at a pro sports event. The thought of putting money in the pockets of grossly overpaid people, most of whom can’t form a grammatically correct sentence, who contribute bubkis to society sickens me. As for “movie stars” and “musicians”, I’m not a big patron as most of them are no different than athletes. How many of these highly paid people actually attempt to make a difference in the lives of the people who are truly making it possible for them to earn these salaries? That’s why i don’t patronize. I don’t want to contribute.

    As for CEOs, Jacque’s comments are right on.

  3. Thanks Jacque and Carol for the comments. Good points all – and yes, Carol, we should be conscious with our “contributions”!

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