10 CEOs Who Earned a Year's Salary in an Hour

NEW YORK (TheStreet) -- Executive compensation has become a hot-button issue and with good reason -- it's utterly ridiculous. According to data compiled by the Institute for Policy Studies (made available on the AFL-CIO's Web site), the average American CEO earned 319 times the salary of the average U.S. worker in 2008. As hard as it is to believe, this pay ratio has dropped over the past decade -- in 2000, the average CEO earned 525 times the average worker's salary.

Until executive pay falls in line with historical levels (in 1980, the ratio sat at a reasonable 42 times), index investors should expect anemic returns while government spending grows at the expense of private job creation.

Consider the following:

1. A reduction in the CEO pay multiple to the 1980 level would allow the average U.S. company to hire an additional 277 workers. This reduction, applied across the Wilshire 5000 index, would create nearly 1.4 million jobs.
2. Executive compensation paid in salary and bonuses is taxed at the highest possible rate. These tax receipts, paid to the federal government, are being used to fund unemployment benefits and stimulus spending.

Think about that for a minute. Instead of hiring prospective workers, executives are (indirectly) paying the same people to stay at home -- unemployed. Alternatively, if an executive is compensated with a massive stock award (rather than salary), long-term shareholders (including 401(k) investors and pensioned employees) are "pickpocketed" by the equity dilution.

It's hard to imagine a greater destruction of economic utility and shareholder equity.

To solve this paradox of capitalism, a grassroots change must occur -- shareholders of publicly traded companies must be involved in ratifying and regulating executive compensation. For progressive investors hoping to make a change, the best course of action is to favor companies with strong insider ownership (look for a history of open-market stock purchases rather than exercised stock options), shun stocks with compensation policies they don't condone or understand and always cast your "say on pay" via a proxy ballot.

According to Forbes' 2008 CEO compensation data , the following 10 companies have rewarded their CEOs with tens of thousands of dollars hourly. Some of these compensation packages may be deserved, but likewise are notable enough to deserve investor scrutiny.

10. McKesson

• CEO: John H. Hammergren
• 2008 Total Compensation: $51,290,000
• Hourly Wage (40-Hour Week): $24,659
• Average American Salary (Year): $32,048

In 2008, John Hammergren's total compensation package equaled 73% of the dividends paid to McKesson (MCK) shareholders. Executive compensation continues to climb at McKesson, but thankfully, so has the dividend -- the payout has grown by 87% in the past two years. At Thursday's closing price of $67.99, share prices reside at January 2008 levels.

Forbes reports Hammergren's 2009 total compensation at $25.18 million.

9. Hewlett-Packard

• CEO: Mark V. Hurd
• 2008 Total Compensation: $51,930,000
• Hourly Wage (40-Hour Week): $24,966
• Average American Salary (Year): $32,048

In a stark contrast to Hammergren, Mark Hurd's compensation package equaled a relatively meager 6.5% of total dividends paid to H-P shareholders in 2008. Hewlett-Packard (HPQ) stock hasn't done much for investors recently, but with a 4.7% liability-adjusted cash flow yield, this Dow component has a valuation that's 12% cheaper than the composite index.

Forbes' 2009 CEO compensation data lists Hurd's most-recent pay package at $24.74M.

8. Monsanto

• CEO: Hugh Grant
• 2008 Total Compensation: $64,600,000
• Hourly Wage (40-Hour Week): $31,058
• Average American Salary (Year): $32,048

Monsanto (MON) has been in the news for all the wrong reasons. The agricultural giant was the focal point (read: villain) of the 2008 documentary Food Inc. -- and since then, Monsanto stock has shed more than 60% of its value. While many might cheer the demise of Monsanto's market cap, sadly, the average Monsanto pensioner will be hurt most. It would be hard to imagine CEO Hugh Grant's salary not cropping up as an issue.

Forbes reports Grant's 2009 compensation package at $26.08M.

7. Allegheny Energy

• CEO: Paul J. Evanson
• 2008 Total Compensation: $67,260,000
• Hourly Wage (40-Hour Week): $32,337
• Average American Salary (Year): $32,048

Allegheny Energy (AYE) shareholders have watched their holdings shed 66% of their value since January 2008, while executive compensation is on the rise. This integrated utility proves even widows and orphans must analyze their stock holdings from time to time.

Forbes reports Evanson's 2009 compensation package at $3.42M.

6. WR Berkley

• CEO: William R. Berkley
• 2008 Total Compensation: $87,480,000
• Hourly Wage (40-Hour Week): $42,058
• Average American Salary (Year): $32,048

When a company is named after its CEO, it's tough to knock the guy's pay package without seeming anticapitalist. That being said, CEO William R. Berkley's 2008 compensation package was nearly two times larger than the dividends paid out to all WR Berkley (WRB) shareholders. Worse yet, the stock has ridden a flat line for the past four years.

Berkley's 2009 pay package was reported at $20.35M.

5. EOG Resources

• CEO: Mark G. Papa
• 2008 Total Compensation: $90,470,000
• Hourly Wage (40-Hour Week): $43,495
• Average American Salary (Year): $32,048

At $90 million, Mark Papa's 2008 pay package is bigger than the market capitalization of 1,544 publicly traded companies. Shockingly, the EOG Resources (EOG) CEO was not the highest-paid oil man in 2008.

Papa's 2009 pay package was reported at $4.22M.

4. Ultra Petroleum

• CEO: Michael D Watford
• 2008 Total Compensation: $116,930,000
• Hourly Wage (40-Hour Week): $56,216
• Average American Salary (Year): $32,048

Of all the companies on this list, Ultra Petroleum (UPL) has a unique shame -- it is the only company that does not pay a dividend. At Thursday's closing price of $46.90, the stock sits at summer 2005 levels. Investors must be mindful that buying into a popular sector has no guarantees of success. Valuation, profitability and managerial integrity are critical components of investor returns.

Watford does not appear on Forbes' 2009 CEO compensation list.

3. Hess

• CEO: John B. Hess
• 2008 Total Compensation: $154,580,000
• Hourly Wage (40-Hour Week): $74,317
• Average American Salary (Year): $32,048

Like William R. Berkley of WR Berkley, John B. Hess got a compensation package greater than all of the dividends paid to Hess (HES) shareholders in 2008. With a dividend yield of less than 0.8% (and a liability-adjusted cash flow yield of only .39%), Hess is arguably the least attractive company in the oil industry.

Forbes reports Hess' total compensation for 2009 at $10.6M.

2. Occidental Petroleum

• CEO: Ray R. Irani
• 2008 Total Compensation: $222,640,000
• Hourly Wage (40-Hour Week): $107,038
• Average American Salary (Year): $32,048

Consider this; The market cap of Occidental Petroleum (OXY) is less than one-fourth of Exxon Mobil (XOM), yet Occidental CEO Ray Irani's 2008 pay package was seven times as large as that of Exxon's Rex Tillerson. Shareholders of either company are no richer today than they were in the summer of 2008, but investors betting on an oil recovery would be wise to invest in companies with a history of returning value to shareholders.

Forbes reports Irani's total compensation for 2009 at $103.07M.

1. Oracle

• CEO: Lawrence J. Ellison
• 2008 Total Compensation: $556,980,000
• Hourly Wage (40-Hour Week): $267,779
• Average American Salary (Year): $32,048

In the time it takes you to read this sentence, Larry Ellison has made $500. (Go ahead, check the math.) Ellison's record compensation package drew the ire of the media in 2008, but the negative PR may have helped to advance a reasonable shareholder proposal -- Oracle (ORCL) paid its first dividend in 2009.

Forbes reports Ellison's total compensation for 2009 at $130.23M.

-- Written by John DeFeo in New York CityFollow @johndefeo