For 2008 the average total compensation for CEO's of S&P 500 corporations was $10,914,613.
For 2008 the average total compensation for CEO's of the Big 4 rail corporations was $14,351,006.
Does that seem a bit high compared to other industries?
C&NW, CA&E, MILW, CGW and IC fan
schlimm For 2008 the average total compensation for CEO's of S&P 500 corporations was $10,914,613. For 2008 the average total compensation for CEO's of the Big 4 rail corporations was $14,351,006. Does that seem a bit high compared to other industries?
The other 496 CEO's don't have to put up with railfans?
"We have met the enemy and he is us." Pogo Possum "We have met the anemone... and he is Russ." Bucky Katt "Prediction is very difficult, especially if it's about the future." Niels Bohr, Nobel laureate in physics
You seem to have found a new can of worms to play with-----
I'm not too sure I like the sampling size procedure here but here goes--
I'm never too fond of CEO compensation packages that have run upwards of 400-700X the average salaried employee gets. Most of the upward pressure here seems more related to the various financial sectors and what they get. And we all hear about parity with our-----------------------(fill in what the competitors give as compensation)
Given the current debate over compensation and the seeming lack of performance measures within that field, I wonder what the next couple of years of surveys will find-----
BTW---what was the source for this can of worms anyway?
Any argument carried far enough will end up in Semantics--Hartz's law of rhetoric Emerald. Leemer and Southern The route of the Sceptre Express Barry
I just started my blog site...more stuff to come...
http://modeltrainswithmusic.blogspot.ca/
What was the structure of the compensation? More than likely restricted stock, which vests in several years. The stock compensation is often tied to meeting or exceeding certain thresholds or targets such as profitablility, return on invested capital, etc. The proxies will be out within a couple of months and those can be read and digested for complete 2009 compensation. At that time you can compare 2009 and 2008.
Most companies attempt to limit cash compensation, due to IRS restrictions of $1million in cash being tax deductible.
2008 was probably one of the last big years for compensation for CEO's. I use the term "big years" comparitively as there is often going to be comparisons of CEO compensation to the rank and file with considerable discussions. 2009 should have found considerably lower compensation as target were probably not met, thus limiting restrictive stock awards.
Ed
IMHO - Regardless of the industry, there was NEVER (and will NEVER be) a person (man or woman) born that deserves that kind of compensation. As good as they are, it is truly the people in their organizatiion that REALLY make things happen, good or bad.
EDIT: For the record, my opinion above extends to sports figures, entertainers, politicians, etc., etc., etc., not just railroad CEO's.
What do you think is fair? A couple of years ago Oprah Winfrey pulled down $300million. Of course it is her company, and has put quite a bit of effort into Harpo.
My guess is board of directors will pay quite a bit more attention to compensation. The old adage "we pay what everyone else pays" just allows escalating salaries.
ed
MP173My guess is board of directors will pay quite a bit more attention to compensation. The old adage "we pay what everyone else pays" just allows escalating salaries.
The board of directors will do just that if there is no governance issue within that board. There were situations in the recent moment where there may have been some form of conflict of interests and such to muddle up the dang things but there we be.
We pay what everyone else pays allows for just that because no one asks why there is this wage/compensation issue in the first place-----it is what it is------taken for granted. The issue is clouded as well by the fact that the creeping compensation inflation is tied to the problem of attracting--and holding good CEO's. Leaving out the problematic ones who right now hold everyones attention, one has to be able to get and keep these good candidates somehow. And it is through this that we fall into that trap-----got any solutions?
That is why a shareholder needs to start joining up with others who also hold to a position questioning this approach ----- if they are interested in the issue at all
They get what the market says they should get..just like you and me and everyone else who lives in a democratic capitalist society. That's just the way it is.. Look at what ball players make..comedians..etc..
eolafan IMHO - Regardless of the industry, there was NEVER (and will NEVER be) a person (man or woman) born that deserves that kind of compensation. As good as they are, it is truly the people in their organizatiion that REALLY make things happen, good or bad.
Then why do we pay similar (or larger) annual compensation to 'entertainers' whose primary ability is to play games that most of us left on the playgrounds and sandlots of childhood? Tiger Woods became a billionaire by, "Putting a small ball into a series of small holes with implements entirely unsuited to the purpose..."
I, personally, would like to see executive compensation limited to that of the President of the United States. THERE is somebody who can lead the entire world to glory or disaster. No business executive, railroad or otherwise, can touch that level of responsibility.
As for who makes things happen, there has never been a general who won a battle. Battles are won by sergeants, corporals and privates who dig in and do their jobs. The same is true of engineers, conductors and MOW people who have to deal with Mother Nature's worst to keep traffic moving.
Chuck
The site is hardly impartial - AFL-CIO - but they are pulling SEC numbers from the Corporate Library. Who knows what is a fair comp package. An interesting comparison, again for 2008, is the salary of the CEO of FedEx,Fred Smith, $10,940,253, $26.5 bil. market capitalization, vs. that of the CEO of BNSF, Matt Rose, $16,608,233, $33.7 bil.
schlimm The site is hardly impartial - AFL-CIO - but they are pulling SEC numbers from the Corporate Library. Who knows what is a fair comp package. An interesting comparison, again for 2008, is the salary of the CEO of FedEx,Fred Smith, $10,940,253, $26.5 bil. market capitalization, vs. that of the CEO of BNSF, Matt Rose, $16,608,233, $33.7 bil.
We at this site have the wisdom and knowledge to make a judgement about this, REALLY???
We have the priveledge to speculate and postulate about anything, but on this subject I shall, offer an old southern saying "we don't know come here from sickum".
Let's discuss those things which our expereince and knowledge give us some credibility.
Michael Sol and Futuremodal; Where are they now?
Can you say "THREAD LOCKED" in a heartbeat?
tomikawaTT eolafan IMHO - Regardless of the industry, there was NEVER (and will NEVER be) a person (man or woman) born that deserves that kind of compensation. As good as they are, it is truly the people in their organizatiion that REALLY make things happen, good or bad. Then why do we pay similar (or larger) annual compensation to 'entertainers' whose primary ability is to play games that most of us left on the playgrounds and sandlots of childhood? Tiger Woods became a billionaire by, "Putting a small ball into a series of small holes with implements entirely unsuited to the purpose..."
I just love it when we kvetch about a CEO's compensation package when that is tied to the issue that CEO's are technically in charge of upwards of a few 10's or 100's of thousands of employees but we will slather like dogs over some grossly overpaid sports 'professional' who is more like a Prima Dona----
I'm just saying
blownout cylinderMP173My guess is board of directors will pay quite a bit more attention to compensation. The old adage "we pay what everyone else pays" just allows escalating salaries. The board of directors will do just that if there is no governance issue within that board. There were situations in the recent moment where there may have been some form of conflict of interests and such to muddle up the dang things but there we be. We pay what everyone else pays allows for just that because no one asks why there is this wage/compensation issue in the first place-----it is what it is------taken for granted. The issue is clouded as well by the fact that the creeping compensation inflation is tied to the problem of attracting--and holding good CEO's. Leaving out the problematic ones who right now hold everyones attention, one has to be able to get and keep these good candidates somehow. And it is through this that we fall into that trap-----got any solutions? That is why a shareholder needs to start joining up with others who also hold to a position questioning this approach ----- if they are interested in the issue at all
Along these lines, there is this link to an article in Forbes, not exactly a left-wing publication that talks about another taboo topic, (in here at least) corporate greed.
Carl
Railroader Emeritus (practiced railroading for 46 years--and in 2010 I finally got it right!)
CAACSCOCOM--I don't want to behave improperly, so I just won't behave at all. (SM)
I hope I don't contribute to the demise of this thread (don't mean to), but what does "a bit high" mean at the very front of this thread? Based on what criteria for compensation? Other railroads here and abroad? Capitalization, wage envelope, infrastructure, assets and liabilities, number of personnel with the broad range of credentials and skills that a Class 1 CEO needs to access at will, absolute gross annual revenue.....what?
It would seem to me that the figures are concrete evidence of an assignment of worth/value, and that it was negotiated. I am not in business, and never attended a board meeting, but I would think such figures would have to be flown past a corporate entity that has financial accountablity at various levels. The highest people at Nortel and other hi-tech firms were doing very well 10 years ago. No...reaally, really well.
So, leaving aside the envy that most of us lesser mortals might foster for those remuneration packages, the only outrage you'll get from me is when they run an organization into the ground and the rest of us have to smile and pay them what we don't have to give to keep them solvent. Otherwise, I have no idea what way to assign a comparative evaluation to those compensation packages. They are what they are.
-Crandell
I own a few shares of BNSF - for a few more months anyway, until Warren Buffett consummates his acquisition of it - so I'm entitled to express an opinion (see below), even if I'm not technically qualified.
Taking Mr. Rose's stated compensation of $16.6 million for 2008 as above, and dividing it by the 343.8 million shares outstanding that year*, works out to $0.0483 or 4.83 cents per share for his services for the year. Was he worth it ? Well, at the end of 2008, each share was priced at $80****, had earned $6.15**, and had paid out $1.44 in dividends***. So about 3.35 % of my shares' income went into his pocket instead, as compensation for his work on behalf of an earnings stream that is about 127 times larger, and for an investment that is 1,656 times larger. Yeah, I'm OK with all that - and that's even before the run-up to $100 per share with the Berkshire Hathaway acquisition deal.
Subjectively, I'd be OK with anything up to about 10 per cent of the dividends for a CEO's compensation - in Mr. Rose's, case, that would be in the range of $50 million per year. Of course, there's always the many Vice Presidents and Chief Operating Officers and the other executives who also need to be compensated in the same range, so in the aggregate that could quickly eat up the dividend stream if not watched carefully - that I'd not be so accepting of. But this seems reasonable, esp. since Mr. Rose hasn't been throwing extravagant birthday parties for his wife, or buying $6,000 umbrella stands or $16,000 shower curtains for the corporate apartment in New York City that BNSF doesn't have anyway (contrast with the egregious conduct of that nature by CEO Dennis Koslowski of Tyco a few years ago ). And Matt can use the business cars and ''Executive E's'' fleet all he wants, too . . .
- Paul North.
*''Average Basic Shares'', per BNSF's Annual Report for 2008, Consolidated Financial Highlights, page 16 (18 of 111 of the 'PDF' version), at -
http://www.bnsf.com/investors/annualreports/2008annrpt.pdf
** ''Basic Earnings Per Share'', same citation.
***''Dividends Declared Per Common Share'', same citation.
***''Common Stock Price'', approx. average for 4th Quarter, 2008 of High of $90.71 and Low of $70.91 , per BNSF's Annual Report for 2008, 16. Quarterly Financial Data - Unaudited, page 66 (93 of 111 of the 'PDF' version).
should the Union side start to give a view point or the railroad employee? Either way we took a pay cut, We gave up alot of things for the goode of the company , then for 3 years( in reality even more years than stated) straight the company saw records profits even after the big train wreck in granitville, all along the board recieved HUGE bonuses and sticking it to us. When we wanted are share they said market went south and profits with it, but the next day posted record earnings again. then finally gave us part of the bonus not all 15% that we deserved,
I do not have a clue as to who is the master who can adjudicate exactly how much a CEO should make. All I know is that an income inflation has occured. This is similar to what has happened in the sports world--in that everyone went around just piling on the $$$ until we now have situations like the ones we have now. Anyone prepared to hack and slash?
I have heard of some corporations cutting back on stock options( which tend to be some of the bigger issues), parachutes, buy outs and what all. And --you know---RR typically are not as problematic in that the compensation packages were/are not as egregious as some of the things that fell out of AIG, WaMu, BoA, UBS, CitiCorp (last one well wrapped around the Enron thing), and all the others that fell about.
How about the reverse performance bonuses? You did poorly you get paid MORE?
An interesting scenario this----"maximal work for minimal pay----meet----Minimal work for maximal pay"
******note******
I am not advocating some form of hack and slash. I am pointing out some issues that need figuring out here--
If we stick with 2008 BNSF, which seems pretty typical and pretty well-run, we find Matt Rose's total compensation of $16,608.233. The average compensation for the ~40,000 employees was $97,100 (total wages of all employees - $3.884 Bil. divided by the 40,000), which means Mr. Rose was paid 171 times his average worker Nationally, the ratio of CEO compensation to that of the average worker rose to: in 1982, 42:1; in 1990, 107:1; in 2004, 475:1. By comparison the ratios in 2004 in Canada, Japan and the UK were 20:1, 11:1 and 22:1, respectively. So compared to other corporate heads, Mr. Rose is underpaid, but compared to his peers elsewhere, pretty high. Boards of Directors have let this happen for years.
schlimm Boards of Directors have let this happen for years.
I think that some boards have fallen into a bit of complacency around this area several years back. One of the answers I hear is that in order to attract a "good" CEO one has to pay at or above the average value. This MAY have rung true when that compensation was also tied to some kind of performance level but we now have situations wherein that compensation seems to be inverse to the actual performance of said corporation.
I've also noticed in the last few years that a lot of boards have started looking into issues of board governence precisely because of situations like these---CEO's friends or friends of friends/contacts voting their buddy these increases----
blownout cylinder've also noticed in the last few years that a lot of boards have started looking into issues of board governence precisely because of situations like these---CEO's friends or friends of friends/contacts voting their buddy these increases----
I've wondered about the "good old by" club thing here, too. If you look at the boards, a lot are other high-level execs. in other, non-competing industries. Hardly likely to raise questions.
I'm all for compensation tied to performance..for everyone.. not just CEOs. Otherwise I really don't care what others make..doesn't come out of my pocket..If someone can make millions hitting a golf ball or running a large company then good for them.
CShaveRRPutting the POTUS cap on all incomes sounds like an interesting idea--I'm sure ways would be found around it, though, just as the President is capable of receiving outside income, prizes, expense reimbursements, et. al.
-Don (Random stuff, mostly about trains - what else? http://blerfblog.blogspot.com/)
oltmannd [snip] One other thing to consider is where the RRs are in the Fortune 500. The lowest one is NS at 256, so you'd expect the avg compensation of the RR CEOs to be higher than the avg for the Fortune 500.
Thanks, Don - I had the exact same thought, but not enough time to research it. It would be interesting to look up each Class I and the companies on either side of it and compare them in terms of CEO pay, market capitalization, revenue, income, and last year's results. I expect that they would be right in line - they oughta be, or the compensation committee isn't doing it's job right by either side.
Paul_D_North_Jr It would be interesting to look up each Class I and the companies on either side of it and compare them in terms of CEO pay, market capitalization, revenue, income, and last year's results.
I've started doing something like this and it appears like the numbers do line up as regards the comparative compensation levels. I wonder though whether these committees are thinking about setting limits to the compensation levels---thinking about ratios here. There are going to have to be other ways of getting job satisfaction there.
Question----if a person really enjoyed doing what they did for a job would income level be really important? In my job, flexibility of work locations and time is important. I can work from home or on the road--I don't drive and key while driving---or the office. I'm not quite 9-5 here-----QA does this kinda thing, heeheehee
oltmannd One other thought. I wonder what the compensation would be if the compensation committees took the view, "How little can we pay him before he decides to leave." Money is only one thing that makes a job satisfying.
That's exactly why I mentioned the business car and ''Executive E's'' in one of my previous posts. Which one of us wouldn't take the job for say $200,000 a year and unlimited use of them - OK, maybe only in our dreams, but you know what I mean.
Or, as Sir William Cornelius Van Horne, K.C.M.G. - the General Manager and later President, etc. of the Canadian Pacific Railroad - is reported to have famously said, something along the lines of the following: ''I have never worked a day in my life, and I don't intend to. Like most men, I hate it. Building this railway has been a supreme adventure, and I have enjoyed every minute of it.''
But I have to disagree with the view that you twonder about above. That is the parsimonious 'lowest price at any cost' view of a purchasing agent, who knows nothing of the potential value to be gained, but only of supposed cost to be avoided - and which has gotten this country into a lot of trouble in the past 50 years or so. The question instead should be, ''How much do we have to pay to get or keep the man or woman who is most likely to provide the company with its best profit on operations or return ?'', and, ''Is he or she worth it when compared to the next-best candidate and that increment of value that the candidate is expected to deliver ?'' As long as that person can reliably deliver at least $1.01 (and preferably more) for every $1.00 spent, the firm ought to maximize taking advantage of that opportunity as much as possible - not trying to minimize it. Why deny the potential benefit that could be obtained thereby ?
When one compares BNSF with UPS and Deutsche Bahn, it becomes apparent that Rose's compensation is out of line.
Company 2008 Revenue CEO's compensation
BNSF $15.8 Bil. $15.5 mil.
UPS $49.7 Bil. $5.9 mil.
DB $42.8 Bil. $3.2 mil.
So UPS and DB are 2 1/2 to 3 X as large, yet Rose gets 2 to 5 X as much compensation.
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