But then, CEO compensation has ballooned to the point where the average American worker might find it difficult even to imagine. For example, ConocoPhillips (COP) CEO Jim Mulva reportedly received about $17.9 million in 2010, a 25% increase over the prior year, according to a securities filing cited in the Journal. To put that number in context, the median annual income of American households reportedly continues to hover below $50,000, even when adjusted for inflation. Mr. Mulva is undoubtedly good at his job, but is anyone really 358 times better than everyone else?
CEO pay can become even more troubling when buyouts and mergers come into play. For example, Motorola Mobility's (MMI - Get Report) CEO, Sanjay Jha, made a sweet deal when Google Inc. agreed in August to buy the company for $12.5 billion. According to calculations by the Journal and the Hay Group, a management consulting firm, Jha reportedly could earn over $62 million in severance and accelerated vesting of stock options and restricted stock if he leaves Google (GOOG) in the next two years. Jha may be delighted with the deal, but his employees may not share his enthusiasm if Google lets them go. Looking at Jha's personal benefit from the deal, one could easily conclude that CEOs are being incentivized to wind up and sell their companies, not to shape them into vigorous, sustainable businesses that can offer jobs to millions of unemployed American workers.
Critics of hefty CEO compensation might argue that the Dodd-Frank Act's "say-on-pay" provisions, which allow shareholders to reject inflated executive pay packages, are long overdue. But it appears that CEOs needn't worry too much just yet. Shareholders generally seem supportive of high CEO salaries even when companies are in trouble. The Journal reports that in 2010, before the Dodd-Frank Act became law, shareholders objected to executive compensation at only three of 300 companies that had to offer "say on pay" votes to receive bailout funds or chose to do so voluntarily. Of 2,532 companies reporting on "say on pay" shareholder votes so far this year, including Hewlett-Packard (HPT) and Stanley Black & Decker (SWK), only 1.5% of executive compensation packages received a thumbs-down. And, since shareholder votes are non-binding under Dodd-Frank, even corporations whose investors reject executive pay can choose to ignore them.