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Yet Again the Media Distorts Executive Pay

USA Today created another amazing twist of CEO pay realities.  In an article released on Oct. 21 gives us one more example of magazines and newspapers distorting truths to sell in a more competitive online news environment.

Here is a link to the article: https://www.usatoday.com/story/money/business/2013/10/21/ceo-pay-soars-stock/3003155/

This time around, the paper took CEO shares held over a number of years, and reported the sale of those shares along with base salaries as “pay days”. These seemingly eye popping numbers get reported by the paper as compensation earned this year.

In fact, in 2 of the top 5 companies, the CEOS are the founders of the companies; Facebook and Kinder Morgan. Without these two CEOs these companies, including all of the jobs, taxes and shareholder wealth that has been created, doesn’t exist.

A little deeper look into the numbers of the top 5 CEOs reveals that these stock holdings that were sold in the past year represent 0.05% of the market cap of the companies. These shares have been accumulated by these CEOs as a result of their own investments and stock awards over many years. Additionally, Most non founding CEOs hold 3-5% of the company in shares as it is recommended by shareholders. Founders typically hold anywhere from 5-50% of a public company. In every case, these CEOs have financial planners advising them to diversify at least a portion of their total net worth into something other than company stock.

There is irony in that the authors of these articles most likely have 401ks that have benefited from the rise in stock price of these high performing companies and their CEOs, yet diversifying some of their stock holdings translates into the rich are getting richer at the expense of everyone else.

 

Written by Chris Crawford, President of Longnecker & Associates

You can contact Chris with questions at info@longnecker.com

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