5/18/2011 10:59 AM ET|
CEOs got a big raise; how about you?
He says Whole Foods Market has "very low" turnover compared with other supermarkets and the retail sector in general. Plus, a much higher proportion of workers are full time, which he says adds to productivity.
Since 1992, when Whole Foods stock began trading, it is up roughly 21-fold, rising to a recent price at $61.30 from a split-adjusted $2.80 a share. The S&P 500 is up a little over threefold in the same time frame. Whole Foods also ranks as a consistently popular -- if expensive -- grocery store among consumers, and as one of the top places to work.
Why the pay gap matters to investors
Whole Foods' story suggests that the amount a company pays its employees relative to its top executives can give investors insights into how well the company's business and stock might do. So it should be helpful for investors when companies start reporting CEO-to-regular-worker pay ratios by the end of this year or early next -- assuming that provision of the Dodd-Frank financial reform act doesn't get taken out.
Several business groups and Rep. Nan Hayworth, R-N.Y., want to nix it, arguing that the pay ratio is immaterial for investors. They also say it is difficult for companies to calculate because they must incorporate the value of benefits as well as the pay numbers from W-2 forms.
After talking to Whole Foods, I'm not sure these protests stand up. The company links its success at least in part to that pay-ratio limit on most executive pay. So the pay ratio does seem relevant to investors.
Ehrnstein, at Whole Foods, also tells me it's not that much of a burden for his company to calculate pay levels for all employees. In fact, it already does so in annual reports made available to all workers.
An indicator you can use now
Whatever the fate of the Dodd-Frank CEO-to-worker pay reporting provision, you can already use existing pay information to help you make calls on stocks.
Many pay experts and Moody's Investors Service consider it a negative when CEOs make too much compared with the next level of executives. Outsized CEO pay can signal that a CEO has too much control over a company's board of directors. This might suggest the board is weak and not adequately looking out for shareholders. Excessive CEO pay compared with the next tier of top execs may also signal poor CEO succession planning at a company.
Moody's takes this pay gap so seriously that it can affect a company's credit rating.
How big is too big? Generally, any gap that has a CEO making more than three times the median of the next tier of top managers listed in a company proxy is a red flag.
Moody's won't say which companies have had their credit rating weakened because of this measure. But you can calculate the ratio yourself by comparing the pay reported for CEOs to the average pay for the next four executives listed in pay tables in company proxy statements. (You can find them here on MSN Money.)
One that stands out here is Viacom, where Dauman's $84.5 million was almost eight times the median of $10.6 million earned by the executives right below him, says Paul Hodgson of GovernanceMetrics International, an investment risk and governance research firm.
An even more extreme example is the homebuilder NVR (NVR, news), where CEO Paul Saville's $13.5 million in pay last year was almost 24 times the median of the top execs right below him, says Hodgson. Saville's pay was also 782 times the $39,470 earned by the typical carpenter last year -- a pay gap well above the average for S&P 500 companies. The housing sector might be in the doldrums, and a lot of carpenters couldn't even find work. But Saville still got big bucks.
At the time of publication, Michael Brush did not own or control shares in any company mentioned in this column.
Michael Brush is the editor of Brush Up on Stocks, an investment newsletter. Click here to find Brush's most recent articles and blog posts.
VIDEO ON MSN MONEY
I am sorry but NOBODY deserves $84 mln. in just one year! NOBODY! How the hell do you keep workers morale when you get paid enough in one year to retire like a king?! And your workers have to toil away for 40+ years to retire like poor people if ever?!!!
84 mln. is enough for 28 people to retire with $3 mln in hand! At my current pay I need to work 1400 years to get what that jerk is getting! And my salary is above the average for the country!
I just spoke with an ex work associate the other day.....we were discussing how dysfunctional our ex company was.....she mentioned that she was promised a raise last July.....didn't happen. She ran into the CEO and had a chat with him and mentioned that she was promised a raise but didn't get one.......he said, "don't feel bad, I didn't get one either." She replied....your compensation and my compensation are worlds apart and you know I am a single parent raising two children. She resigned in January.
I'm in favor of pay-for-performance and this includes bonuses if the company is healthy and people meet or exceed their performance goals. However, the CEO and SLT bonuses are so far apart from those in the ranks below. Spread the wealth around....and don't be quick to lay "more people off" while at the same time giving yourself a big bonus Mr. CEO. Let's keep in mind, capitalism and free markets and corporations are not the problem. Greed and lust....make big bucks, spend big bucks.....equals: I need more money! Sinful nature.
havasu46: I agree tv personalities, etc. get paid too much, HOWEVER, their not sticking it to the nation @ large by raising prices or taking govnt bailouts or laying off the average joe workers. These companies lay off people in droves then pay their CEO'S billions it's disgusting.
The banks get bailed out of the mortgage mess & keep on smooth sailing yet the average joe is stuck w/bad credit for years! They're the ones that qualified people who shouldn't have been waving those big beautiful houses under their noses.
That's it. I'm disgusted enough for today.
Want to see future America? Look at Mexico where 45% are in dire poverty and escape the country looking for any job and benefits. Mexico is the dirtiest piece of garbage of a country in the Western hemisphere.
Also, look back to Appalachia and the old South to see poor people. So poor shoes were a luxury. Coal mines and cotton mills and every town was poor, including Atlanta.
Mill villages where the mill owners owned the town, the houses, and the company store...Feudalism. Everyone was poor, except one or two mill owners. Poor towns, dirt roads, poor healthcare, disease riddled, uneducated peoples. Yup, Snuffy Smith was the epitome of the South and Southern capitalism.
What I find MOST distasteful is the “Class Warfare” that the ELITE keep throwing out there. They make it seem that ALL working Americans stand around drooling over what the rich have. They SEEM to believe that EVERY American wants to take what they have or drag them down to where they are but that is NOT true.
For those of you boasting that these CEOs have in any way earned that money, you are WRONG. You are wrong unless you believe that bringing down an entire country and much of the world should be rewarded. Like MOST Americans I could care less how much money you have, I do however care when that money is made not by honest means but off the backs of the working class. When the working class is TOLD they have to make up for the loss of taxes because the ÉLITE feel above that sort of thing. I feel offended when the working class is told they MUST bail out the very companies that tank the monetary system and that is NOT class warfare, that my friends is nothing BUT common sense.
Corporate America, bad for the country and the world!!!!!
With all that is going on in the USA, I believe the government wants to turn us into a 3d world country. With their lack of leadership and self helping themselves to the public money there is no help for the American middle class. Will we revolt like the 3d world countries or will we take back the AMERICAN gevernment?
I would argue that big business wants us to become a 3rd world country, and they have their hands in the pockets of politicians.
Until we, the people, quit voting for Democrats AND Republicans, this viscious cycle will continue. Liberals and Conservatives, quit blaming each other because you're BOTH to blame.
If companies have millions to give to CEOs why can't they HIRE so there is adequate staffing and good customer service? We could end the recession if people had jobs so they could spend money. This would stimulate the economy. It is just that simple.
CEOs would not starve if their compensation was halved or even quartered. People whose unemployment benefits have run out are in danger of hunger and homelessness. Nobody wants charity: people want jobs and those presently employed want to stop doing the work of 2+ people!
The Fed is printing money like a drunken sailor to pay for BIG govt and the excesses of Wall St. The increase costs of food, energy and other essential items (inflation) is a means to finance the MACHINE. So while the oligarchs on Wall St bathe themselves with HUGE salaries and bonuses (buying the influence of your elected officials), the common man foots the bill and is happy to receive the paltry 3% pay raise... Brainwashed by the media and drugged up by the pharms, you trudge along the hamster wheel like zombies. Freedom is but an illusion as you are all slaves and don't even know it.
Poor consumers will equal many businesses closing in the future.
No Medicare or social security means savings must become paramount, not spending. No company pensions will mean more savings, not spending. Rising healthcare costs means drop that internet to buy prescription drugs and pay for that office visit .
Oil and food prices rising means housing has to be cheaper which means less profits for builders.
What the working class right does not understand is that what they do for a living will be gone as workers make less and pay more for gas and food and save for pensions and retirement.
The country will revert back to the days when a pair of shoes was your Christmas present and the internet did not exist. Think about it. All the wealth will gravitate to a handful like in Mexico and the rest of you will be running fruit stands like in Mexico.
Most all of the Millionaries in the USA are either CEO's or working in Politics. In both cases it's the rest of us peons who pay
their wages. Some people were born to live off others and these so called rich bas-ards don't care who they walk over. Most
likely they will get their rewards, as the Bible says, It will be harder for a rich man to get into heaven then for a camel to fit
through a key hole. I love America and it takes all kinds of people to make it the land we love. It's too bad some think the
world owes them a living.
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