With all the recent news and arguing over CEO pay here, here and here, I thought I'd step up to the plate and inject some reason into the discussion. After reviewing all the data, I can only conclude that since these CEOs are the world's best teachers, they deserve much higher pay and respect. I'll explain.According to PayScale, the average schoolteacher makes approximately $40,000 per year. In any given year, how many students can they teach? A few hundred? Maybe a few thousand. Let's be generous and say 4,000 students. So, we're talking $10 per student per year.
Since, as investors, you should care only about stock performance, not business performance, we must apply the same pay scale to high profile CEOs who have taught hundreds of millions of shareholders the most important investing lesson of all -- to never trust anything they say, especially when they are so eternally optimistic. Let's also add up the shareholders from all these big struggling companies and do the math; we come to 100 million shareholders (in reality, if we add in all the pension plans and mutual fund investors, the number is many times greater) at $10 per student per year, or $1 billion.
Now, thanks to my handy WSJ CEO scorecard and my previous article dealing with CEO pay, we see the salaries of all CEOS of the biggest companies with the angriest shareholders. Here's the list:Citigroup (NYSE: C) Chuck Prince $140 million
Countrywide Financial (NYSE: CFC) Angelo Mozilo $110 million
Merrill Lynch (NYSE: MER) Stanley O'Neal $91 million
Morgan Stanley (NYSE: MS) John Mack $41 million
Yahoo! (Nasdaq: YHOO) Terry Semel $40 million
Capital One (NYSE: COF) Richard Fairbank $37 million
Sirius Satellite Radio (Nasdaq: SIRI) Mel Karmazin $31 million
Ford Motor (NYSE: F) Alan Mulally $28 million
Advanced Micro Devices (NYSE: AMD) Hector Ruiz $13 million
E*Trade (Nasdaq: ETFC) Mitchell Caplan $11 million
Less than $500 million in total compensation! Using the $10 per student figure, they are underpaid by at least half, but probably more. If we're a little more realistic in saying the average schoolteacher has 1,000 students per year, or $40 per student, that means all these CEOs should be making closer to $4 billion. That would mean they are getting just over 10% of what they're truly worth.
If we don't up their pay soon, we're going to lose our greatest teachers. Investor learning would be dealt a catastrophic blow. What then, CEOs who actually tell the truth, no matter how grim?!?!? I don't even want to contemplate such things. If you believe -- as I do -- that the investors are our future, we must act now to give these CEO teachers what they deserve!
Timothy Sykes writes the blog timothysykes.com, is a former hedge fund manager, star of the TV show Wall Street Warriors and author of the book, An American Hedge Fund: How I Made $2 Million as a Stock Operator & Created a Hedge Fund











Reader Comments (Page 1 of 1)
3-10-2008 @ 10:40AM
dr.doom said...
Sounds too simplistic to me. If the scoolteachers mentioned invested in most of the companies mentioned, they would now be looking for second jobs to supplement their loses.
3-10-2008 @ 11:49AM
Pat King said...
I was pleased to discover you were being sarcastic in your article. It's too bad the headline did not make that clear because too many will read the headline and not read the article. Thus, they will have implanted in their memories the notion that CEOs are underpaid.
The only solution I can see to the problem of CEOs pay is too return control of corporations to the stockholders. Give stockholders control of who sits on the board of directors and tie CEO compensation to actual performance. Get rid of the old boys network that currently sets CEO compensation.
It is past time for the United States Congress to set the record straight. Corporations are not human beings and, therefore, are entitled only to the rights granted to them in laws passed by Congress. They do not automatically enjoy human rights. Their right to advertise, to lobby Congress, etc. are only theirs to the extent the laws that establish corporations right to exist also establish their rights to advertise, etc. In other words, they exist at the pleasure of the Congress. The congress may change the terms of their right to exist at any time it chooses to do so.
3-10-2008 @ 12:27PM
Joe said...
Almost all CEOs are grossly over-onpaid with salary and perks. Example, Halliburton keeps a 102-foot yacht in the Florida Keys with fulltime captain PLUS a $1 million home for executives and wives to use on weekends.
What a gross misuse of corporate funds!
3-10-2008 @ 4:27PM
Greg said...
These CEOs are so self-centered and egomanical that they too would actually agree with your logic. Yes, I am undervalued to my business and shareholders...but only if they really understood me. The common denominator in all of these people is GREED! How much is enough? It is never enough for these types. What about the private planes; yatchts; seminars/conferences; free expense accounts; perks unlimited; and of course their A-list friends (US Senators/Reps.). Anyone for golf in Scotland this afternoon?
3-10-2008 @ 8:14PM
Jerry Sombati said...
all I can say as you see it happening, they want more, but wait they want to layoff more workers, they dont care about investors, profits profits profits but they wear stupid across their forehead, the only wait to make a PROFIT, if there is ANYONE left to buy it, at the current wage and the doom and gloom of the economy, I see them crying at the golf course, we CANT make a profit what went wrong, DUH guess Stupid, only you have the money and your buddies to buy what you sell, enough said they went to the same school bush went the dunced class
3-11-2008 @ 1:11AM
alan said...
If you examine the P&L of any Fortune 100 company what is clear is that salary and fringe are the largest expense component regardless of industry. No it's not premises, or advertising or R&D or whatever line item
Further, top management, lets say the 6% at the tip of the pyramid, TAKE ROUGHLT 50% OF THE SALARY !!!!
Hey, a**hole Board of Directors, want to have a dramatic cost reduction and see marginal impact on operations, get rid of half of these jerks.
Just keep the good ones, of which about half of them are. And tell the survivors that you have terrible news for them. "Hey Mr/Mrs managing director, your base will be reduced from $800 k to a paultry $500 k, AND if the company does well AND only if it does well, your bonus will not be 3X your base but a miserly 2X.
I guess we'll see a lot of management applying for food stamps and housing assistance. Yes, let's spread the joy evenly to all.
3-13-2008 @ 6:29PM
KEN said...
ALL these ceo's had
teachers ,so does that mean the teachers are way underpaid ore should the ceo'split there wages with the teachers that taught them.therefor the shareholders should thank the teachers!!!!!!!!!
3-14-2008 @ 2:32PM
Larry said...
No CEO of a publicly traded company is worth more than twice what the President of the U.S. makes, including stock options.
3-23-2008 @ 1:13PM
Gene Dexter said...
Really funny article. Thanks for posting.
One day CEO's will actually teach the rest of us what their work actually is other than lunch meetings at Le Cirque and being seen at Davos.