CEOs, some declare, make too much money. The basic premise of this claim is that the ‘excessive’ pay is undeserved–-that executives take home runaway paychecks regardless of performance. Others say that no matter how well a CEO performs, no one is worth millions of dollars. They point to the gulf between what a CEO earns compared to his lowest paid worker-–as if the mere fact of making more money is proof of undeserved income. The government, they believe, should forcibly take away the ‘excess’ money, or else force companies to limit executive compensation.
But this argument leaves out just how valuable a CEO can be. Consider some examples:
Jack Welch took General Electric revenues from $26.8 billion in 1980 to nearly $130 billion in 2000. About 276,000 employees scattered in over 100 countries worked under his command. He simplified the managerial structure and directly interacted with several thousand GE employees every year. Jack Welch’s ability to lead more and manage less–to recognize and reward the most talented managers–is still examined in business classrooms all over the world. Welch’s salary, which grew from $4 million to $16 million, seems paltry when one considers that under his leadership GE grew from a company worth $14 billion to $410 billion.
Or consider Kenny Troutt. With a single-minded focus on succeeding, he worked at construction jobs to pay for college. He founded his own company, Excel Communications, and used multi-level marketing to offer long distance phone service to his customers. From nothing, he created a company worth $3.5 billion when he sold it to become a self-made billionaire.
The legacy left by individuals like Kenny Troutt and Jack Welsh, extraordinary though they are, is that in a land of opportunity, dreams can be realized. It takes a determined focus on acquiring the skills necessary to effectively lead a large organization. The work involved is immense, and it is a rare man who is willing to undertake such an effort. No wonder then that stock holders jump at the opportunity to have such people lead their companies. No wonder that these individuals earn such high salaries.
They’re worth every penny.