Highest-paid CEO collected $145.3 million in a year
One-Percenter of the Week: Earning 47% more than the No. 2 chief executive in 2010, McKesson's John Hammergren tops a new list of well-compensated honchos.
At a time when many Americans had to make do with less as companies chopped jobs and pay, it was bonanza time for the nation's CEOs, according to a new study that says CEO take-home pay jumped 36% last year.
But even among the privileged CEO class, one top earner stands out. For leading the newest list of highest-paid CEOs with a paycheck that was a whopping 47% above the No. 2 earner, I'm making John Hammergren, the CEO of McKesson (MCK), my third One Percenter of the Week.
Hammergren leads a list of the highest-paid CEOs just published by GMI, an Independent corporate governance research firm, because he took home a cool $145.3 million last year. Joel Gemunder of Omnicare (OCR), No. 2 on the list, earned a paltry $98.3 million.
That gap certainly makes Hammergren the king of the CEO hill. But it's nothing like the pay gap between CEOs and regular workers. The 36% jump in CEO pay last year, which put median pay for S&P 500 CEOs at $8.9 million. In contrast, median annual household pay for Americans actually fell 2.2% last year to $49,445, according to the government.
And Occupy Wall Street shouldn't worry about the widening gap between the rich and everyone else?
Here's how Hammergren took home so much.
- Much of the increase in overall CEO pay last year was due to an options frenzy as CEOs cashed out in a strong stock market rally, and Hammergren was no exception. He banked profits of more than $112 million in 2010 as he exercised 3.3 million stock options.
- The value of his retirement benefits rose $13.5 million to more than $83 million.
- His base salary of $1.7 million was in the top 10% for the S&P 500.
- He also got a parade of perks worth $1 million. This included $122,000 for home security and monitoring services, $100,500 worth of use of the company aircraft for personal flights, $9,000 for the cost of a personal driver and car, and $16,935 worth of help with his taxes. He perks included $729,000 in company matching contributions to a retirement plan.
Hammergren's biggest payout may still lie ahead. In a takeover scenario for McKesson, Hammergren would be due $469 million, including a $141 million in severance pay, a pension worth $124 million, $90 million in accelerated stock vesting, and a tax gross-up of more than $77 million, according to the report written by GMI's Paul Hodgson.
Falling pay for most households
For a little perspective, the average annual U.S. household income, at $49,445, has fallen so much in the past several years that families now have to make do with the same amount they earned back in 1996, adjusting for inflation. And last year, 2.6 million more people slipped into poverty, increasing the poverty rate to 15.1%, from 14.3% in 2009, according to the Census Bureau.
But in the corner offices in 2010, CEOs were enjoying ever more lavish perks, like private use of company jets, personal chauffeurs and elaborate home security systems (to guard against their properties being occupied by 99 percenters, perhaps?). Home security systems for CEOs, paid for by shareholders, sometimes run as high as $100,000, more than twice what a typical American family makes in a year. Overall, perks given to CEOs at S&P 500 companies rose 11% last year, according to the GMI report.
McKesson declined to respond for comment. But in Hammergren's defense, the company's stock is up more than 117% in the 10 years since Hammergren became CEO. In contrast, the S&P 500 is about flat in those years. In filings, the company points out that earnings at McKesson have grown much faster than earnings at S&P 500 companies, and sales rose steadily on Hammergren's watch -- despite the financial crisis. Revenue grew to $112.1 billion in 2011 from $93 billion in 2007.
Still, $145.3 million is a doozy of an annual pay package, at a time when so many people have to do with so much less. And as companies pinch pennies on worker pay, is any CEO really worth nearly half again as much as any other CEO?
So for earning 47% more than the second-highest-paid CEO -- and about 3,000 times the amount earned by the typical American household -- I have no qualms about making Hammergren my One-Percenter of the Week.
At the time of publication, Michael Brush did not own any shares of any stock mentioned in this column. Brush is a Money columnist and the editor of Brush Up on Stocks, an investment newsletter. His columns appear Wednesdays.
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Wow, the highest paid CEO. What does his company do? This: "McKesson Corporation (McKesson) provides medicines, pharmaceutical supplies, information and care management products and services across the healthcare industry."
I guess we can stop wondering why health care and pharmaceuticals are so expensive.
We have 17 million unemployed, 22 million underemployed, 51 million without any health insurance, 48 million on food stamps and assistance, 5 million foreclosed homes, I million homeless, empty malls, shopping centers and factories and no real end in sight to this unbelievable economic meltdown.
I don't want to sound like some kind of prognosticating anarchist here, but the day will surely come when these grossly overpaid, theiving fat-cat CEOs will be awakened in the middle of the night to find their twenty five million dollar estates surrounded by thousands of armed people who have lost their jobs and have had enough of the blatant greed and avarice that put them into that position. Perhaps after a few dozen of these stripe-suited platinum-plated crooks are strung up from the nearest trees and light poles the Fortune 500 corporations will stop paying these do-nothing pigs such obscene salaries. If things do not begin to improve for the average hard working American citizen then we will assuredly be put on a path to a revolution in this nation, the likes of which will make 1776 and 1861 look like a Sunday school picnic.
Peace to all
Did it say that CEO pays are UP BY 36%??!! WHAT?? Wait for a second there I thought we were in a recession. I'm sorry but this is absurd. We are at a point in America where there is no middle class anymore. Your either rich or poor. Does the work that this man does really merit 145.3 million dollars??? The President of the United States does not even make half of that and he is running the entire country! We are going down America and it has come to the point where there is nothing we can do about it except just sit back and watch in amazement. Insane!
THIS ABSOLUTELY JUST MAKES ME WANT TO VOMIT! THERE IS NO ONE ON THE PLANET EARTH WORTHY OF $145 MILLION A YEAR. I DON'T CARE WHO THEY ARE OR WHAT THEY DO AS A PROFESSION.
THIS IS EXACTLY WHAT IS WRONG WITH THE ECONOMY. WE PAY NORMAL EVERYDAY NEANDERTHALS MILLIONS UPON MILLIONS OF DOLLARS FOR DOING NOTHING!
AND WHAT IS WORSE IS WHEN THESE SAME PEOPLE WHINE ABOUT ONLY MAKING $40 MILLION THIS YEAR, INSTEAD OF $50 MILLION, GIVE ME A BREAK!
I WONDER HOW MUCH THIS GUY HAS GIVEN TO CHARITIES? HOW MANY HOMELESS PEOPLE HAS HE HELPED? HOW MANY SOUP KITCHENS? FOOD PANTRIES? CHILDREN'S HOSPITALS? I BET THE ANSWER IS A RESOUNDING: NONE.
I MAY BE WRONG. BUT, HISTORY HAS TAUGHT US ONE THING: THAT THE ULTRA-WEALTHY ARE THE ULTRA-FRIVOLOUS. ONE WORD: MADOFF.
Wouldn't you want your CEO's paycheck tied directly to company success?
Not when he's laying me off at said company to get it....azzwipe!
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