Executive Living: Compensation Goes Up, Trust Goes Down

Just weeks after President Bush criticized lavish salaries and bonuses for corporate executives, two new surveys are showing that although executive compensation has risen nearly 29%, employees’ faith in those on the highest corporate rungs has fallen sharply.

“Government should not decide the compensation for America’s corporate executives. But the salaries and bonuses of CEOs should be based on their success at improving their companies and bringing value to their shareholders,” President Bush said in his “State of the Economy” speech.

“You need to pay attention to the executive compensation packages that you approve. You need to show the world that American businesses are a model of transparency and good corporate governance,” he said.

One new survey shows that while those compensation figures are rising, it’s unlikely that anyone is adequately paying attention, according to the Economic Research Institute and CareerJournal.com.

That data shows that top executives in the United States received a 28.7% increase in their average annual cash compensation compared to the same period one year ago.

Data shows that:

  • Base salaries jumped 1.69%. For the highest-paid executives, the average base salary stands at $1,304,664, compared to February 2006 base salary levels of $1,283,002.
  • Annual bonuses increased 42.1%. For the highest-paid executives, the average annual cash bonus is $3,668,324 compared to the prior year cash bonus levels of $2,580,139.
  • Total cash compensation increased 28.7%. For the highest-paid executives, the average total cash compensation (base + bonus) is $4,972,988 compared to February 2006 total cash compensation of $3,863,141.

“Income inequality is real and continues to widen,” said David Thomsen, director of the Economic Research Institute, in a release.

According to the nonpartisan Congressional Budget Office, the wealthiest 20% of households accounted for 45.4% of total U.S. income in 1979, but claimed 53.5% in 2004. Households in the bottom fifth dropped from 5.8% to 4.1% over the same period.

Respect on the Higher Rungs

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The higher up the ranks an executive goes, the more challenging it becomes to communicate with staff, according to the results of a second survey, this time from Robert Half International and CareerBuilder.com.

Data show that employees trust their managers much more than they do senior executives.

Of 3,000 workers polled, 52% are unsatisfied with their corporate leaders’ performance, while 44% of workers are unsatisfied with their managers’ performance.

Another 60% say they trust their bosses, but only 40% say they trust their corporate leaders.

And 36% think those at the top lead by example, and 34% find their corporate leaders are effective at motivating staff.

But it’s hard on any rung of the corporate ladder: fewer than a quarter of workers polled think they could do a better job if put in charge.

Elaine Rigoli has nearly 15 years of experience managing content and community for various B2B and consumer websites. Elaine has written thousands of business and technology articles and has been quoted in The Wall Street Journal and eWeek, among other publications.

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2 Comments on “Executive Living: Compensation Goes Up, Trust Goes Down

  1. This article is slightly misleading as total comp always rises in a recovering economy . . . however, the real problem with executive comp is the golden parachute packages that the execs exercise when they are let go/resign, etc.

    Shareholders have no transparency of these exit packages, and frankly, they are well out of hand.

    Expect the SEC to crack down on this further moving forward (Bob Nardelli’s quarter-million USD exit package from HD really upset some people).

  2. CEO comp has risen in direct proportion to the risk assumed by those highest on the ladder. Companies now place as much weight on risk management initiatives and avoidance of litigation as they do on making a profit.

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