The Star Tribune’s 2006 Annual Report on Executive Compensation
May 23rd, 2006,This entry marks the first of a new category I’m calling “Inequality.” From time to time I’ll post entries related to that issue, largely out of my concern that inequality is rising in our society and around the world.
Kudos to the Star Tribune for continuing to report on the issue of executive pay. They released their 2006 Annual Report on Executive Compensation, published on the front page of the Business section on May 22. The report shows that median compensation for Minnesota CEOs was $1.791 million, a 59.3 percent increase over last year. According to the report, this hefty increase comes despite relatively lackluster stock-market performance by Minnesota companies. Almost half of the 99 firms in the report had negative one-year returns.
If you think CEO pay is too high in Minnesota, just consider what’s happening nationally. Median pay for CEOs nationally is far higher at $6 million.
In a column published with the report, Star Tribune business writer Neal St. Anthony provided some critical analysis. He looked at work done by an organization called the Corporate Library, particularly their report card on CEO pay. They gave low ratings to Northwest Airlines, PepsiAmericas, U.S. Bancorp, Nash Finch, Target, and UnitedHealth Group. Stockholders in those companies should take notice.
St. Anthony also includes comments from former Medtronic CEO Bill George, who has been critical of executive pay decisions:
George, who retired in 2001 and now writes about executive leadership, described in a 2003 speech how the personal dynamics between the CEO, the board of directors and the compensation consulting industry can influence CEO pay.
“CEOs love to spend time with other CEOs,” George said. “The only downside is that you may feel underpaid.
“The compensation consultants … tell you that you’re not only woefully underpaid but dangerously so. In fact, they’ll warn your board of directors: ‘He could bolt the company at any moment!’
“There’s a factor other than truth at play,” he said. “The board wants to send Wall Street the message that the company has the very best CEO money can buy. Put too low a price tag on a bottle of wine, the fear is, and people might assume it’s a mediocre wine.”
May 23rd, 2006 at 11:32 pm
William Ostrem,
I often find your blog entries interesting. You indicated once you had studied Auden. I was fortunate to have him as an instructor in Oxford in 1973 and enjoyed the experience immensely. This time you hit upon an issue that is crucial to our future as a democracy and that is the way our current system is redistributing wealth away from the middle class and into the control of a small elite leadership class. What ideas do you have to reverse this trend? I also attended the presentation by State Demographer Tom Gillaspy mentioned in Anne Bretts blog. It remains a mystery what will become of us as we age as a state and nation. - David
May 24th, 2006 at 9:58 am
David, Thanks for you comment. I’d like to hear more about your experience of Auden some time. I eventually hope to publish my dissertation online. It looked at Auden’s representation of England in his early work.
As far as reversing the trends toward inequality that you mention, the first step would be reinstating the estate tax that was eliminated under President Bush, as Warren Buffett and others have recommended. Beyond that, I’m not full of ideas, though I’m sure they are out there. What are your ideas?
By the way, your blog design is really nice. I had checked it out after learning about it via Michael Blaha.
May 24th, 2006 at 3:06 pm
I always thought the most famous trojan of the class of 84 to come to Northfield was Koepke. How wrong I was! I saw your post re: biking in Northfield on Northfield.org and thought- could that be the Bill Ostrem of WHS. Sure enough! I will be back to your very thoughtful and creative blog.
May 24th, 2006 at 8:07 pm
I remember you, Steve! Actually, Kevin Koepke was the class of ‘83. And you were 85? Did you go to Carleton? And you live in Northfield now?