Thursday, January 29, 2009

Lessons From Ben and Jerry

Executive Officer salaries in United States firms have become obscene.  Actually, they have been obscene for years, but it just stands out more in a recession.  Jeffrey Immelt, the CEO of General Electric, brought in $9.1 million in base salary and $3.03 million in bonuses during 2007.  Exxon Mobile's CEO, Rex Tillerson, earned a cool $8.2 million in 2007.  And Robert Iger, the CEO of Walt Disney Corporation, yes that creative Florida Company that provides an escape for so many families each year, earned a $16 million salary in 2008.  By the way, Mr. Iger missed out on any bonus in 2008, but I'm sure he won't complain with that kind of base salary.  One can certainly argue that these corporate leaders have a stressful job, but are they really worth that much?

In 2008, we have seen the financial services industry and the auto industry in the United States teeter on the brink of collapse, yet some of these bozos continue to collect enormous salaries and bonuses thanks to tax payers.  How long can our society keep rewarding bad performance?  In high school, if you made Ds and Fs, you weren't rewarded by getting a scholarship to Duke University or MIT.  As a matter of fact, our culture teaches us early on that if you do a good job, you will be rewarded.  The executives at these firms should feel guilty about taking this kind of money while thousands in their industry are being laid off.

In the early 1980s, the Vermont ice cream company Ben and Jerry's had a policy that no employee could make more than five times what the lowest paid worker earned.  In 1986, this rule capped the CEO's pay at $81,000.  The money saved from having this policy was redistributed throughout Ben and Jerry's to help the company grow.  This policy was eventually scrapped in 1994 when Ben Cohen, the "Ben" of Ben and Jerry's, retired from the top position.  It proved difficult for the Vermont-based company to find an outside leader that would adhere to the unique policy set in place by the founders.  Now I know what you are thinking......isn't this SOCIALISM!!  You're absolutely right.  Ben and Jerry's brought a dose of socialism into the American corporate world and it worked.  Employee morale was good, the company did well and plenty of U.S. citizens continued to eat great ice cream.  I'm certainly not suggesting that all companies institute a policy just like Ben and Jerry's, but similar logic could work.  What if the policy said that the highest paid worker can't earn more than thirty times the lowest paid worker?  If the lowest paid worker made $30,000 per year then the most anyone could make would be $900,000.  I think $900,000 would be plenty to support a lavish lifestyle for anyone.  The bottom line is that socialism gets a bad rap.  A spoonful of socialism might be the right medicine for corporate America because the greed thing has got to stop.


  1. I believe that the salary cap idea is a good one for small companies, like Ben & Jerry's was before 1994. The problem occurs when the company expands exponentially. The lowest salaries probably won't go up a whole lot, but the responsibility of managing 100 employees is very different from the responsibility of managing 10,000. More responsibility requires a higher salary.

    The companies you cited in your article are not smaller businesses like Ben & Jerry's was in 1994. These a huge multi-national firms that have hundreds of thousands of employees. (Disney has 133,000 employees, GE 316,000, and Exxon has 83,700)

    If I have the skills to manage 316,000 employees and pilot a corporation such as GE, I'm going to command a hefty salary. Being a CEO is not all fun and games like the media makes it out to be. If GE could hire an equally capable CEO at $900,000, I'm sure they would. The problem is that no one with the right skills and experience is willing to work for that low of a salary if they could get more elsewhere.

    As a comparison, Ben and Jerry's employed 537 people in 1994.

  2. Kevin. Kevin. Kevin...

    Goldman Sachs CEO Lloyd Blankfein made $47 Million last year.

    John Thain, the CEO of Merrill Lynch received $83 million in compensation for the year, despite presiding over a company that posted a $9.8 billion loss in the fourth quarter. He replaced former CEO Stanley O’Neal on December 1, 2007. O’Neal left the bank with a compensation package worth over $161 million, despite his direct oversight of the bank’s gambling with mortgage-backed securities that ultimately exploded in 2006-2007.

    I find it sad; for always touting what a god-fearing country we are, among the seven deadly sins, Greed goes not only unchecked — but encouraged.

    Read this and weap:

  3. I think a Ben and Jerry's style rule would be appropriate for nonprofit organizations such as charities, credit unions, cooperatives and mutually owned life insurance companies, perhaps a max ratio of 10:1?