Home / Fidel is waiting for your call

Fidel is waiting for your call

Please Share...Print this pageTweet about this on TwitterShare on Facebook0Share on Google+0Pin on Pinterest0Share on Tumblr0Share on StumbleUpon0Share on Reddit0Email this to someone

Steven A. BurdOne of my critics over at Blogcritics left this little factoid on my initial “Lost in the Supermarket” post:

Steven A. Burd
Chairman President and CEO
Safeway Inc.

In 2002, Steven A. Burd raked in $1,258,000 in total compensation including stock option grants from Safeway Inc.

From previous years’ stock option grants, the Safeway Inc. executive cashed out $10,968,122 in stock option exercises.

And Steven A. Burd has another $76,752,557 in unexercised stock options from previous years

This is a common tactic used by leftist critics of capitalism — try to make the case that workers suffer because CEOs are raping them in order to sip Dom Perignon from diamond-encrusted slippers.

Don’t get me wrong — earning more than a $1 million a year seems like more money than any person could possibly need, and adding $88 million in stock options, when taken in isolation, seems obscene.

But making an issue of executive compensation is posing a false dichotomy. Workers do not suffer because executives make a lot of money. Workers are better off because executives make a lot of money.

Let me ask you this — how much more money do you think you would need to make to make your life appreciably more comfortable. For me, it’s about $40,000 per year. Yeah, if I made another $1,000 per year, I could buy a few more cigars or CDs, or go out to dinner a couple of more times per quarter, but for me, somewhere between $1,000 and $40,000 is a plateau where I never stress about paying the bills and can still take nice vacations and buy my wife a new car.

If I worked for Safeway (parent company of Von’s), how much of Mr. Burd’s compensation would need to come my way to meet my goals? Well, obviously, if I were the only employee to get a portion of his annual salary, $40,000. But presumably, the critics of Mr. Burd’s compensation package want to see his salary spread among all Safeway employees. All 172,000 of Safeway’s employees.

So, let’s knock Mr. Burd’s salary down to $100,000. How much would my share be, if shared equally with the other 169,999 Safeway employees? I would get an extra $6.70 per year. I don’t know about you, but I think there is a rather wide gap between the $1,000 I want and the $6.70 Burd should pay to his employees each year.

Let’s look at it another way. In order to give each Von’s employee an extra 10 cents per hour, which works out to only $208 per year for a 40-hour worker, it would cost Safeway at least $500,000 PER WEEK (depending on what percentage of their total workforce works part-time). Over the course of a year, that’s more than $26 million per year.

Sorry, but Mr. Burd doesn’t make that much money annually.

As for stock options — let’s remember that stock options are not annual revenue. They are one-time payments, so if we are going to spread the wealth among the entire Safeway workforce, it’s only a one-time stipend. If we divide that $88-million among all 172,000 employees, each worker would get a $511 payment. Sure, it’s a nice Christmas bonus, maybe, but it’s nothing to sustain an upgrade in lifestyle. It’s not going to put you on Mr. Burd’s yacht. It won’t even buy you his bathtub (rubber duck not included).

Some might object still that the disparity between the average grocery bagger earning $20,000 per year and Mr. Burd’s millions.

But of course there’s a reason CEOs make millions and baggers make mere thousands — CEOs contribute more to the bottomline than baggers do. Good CEOs are harder to find than good baggers. CEOs need more training and more experience. CEOs deal with greater pressures. And if they do their job well, the $88 million they earn in stock options are a mere pittance compared to what they earn for the entire pool of investors.

And the synergy between investors and their investments, and CEOs and their decisions, are what makes it possible for that bagger to have a job at all. CEOs are not leaches on the economic system. They are vital to the system. They create jobs, create the growth that makes jobs and benefits possible. They earn the right to receive whatever compensation package their board of directors think they are worth. If a CEO wasn’t worth that kind of money, believe me, no board in the world would authorize that kind of compensation. And that is something that leftists, who accuse capitalists of being greedy bastards, seem to miss — if a company’s board thought they could make more money by paying a CEO less money, they would do it faster than you can say Benjamin Franklin. Few CEOs earn more than their worth (the occasional corrupt Enron executive being the exception, of course). Taking away a CEOs ability to be compensated generously will not make the average worker richer, but it would certainly make corporations less profitable, which would mean fewer employment opportunities for us all.

If you don’t like CEO compensation packages, I know a couple of countries where you might be happier. They’re called Cuba and North Korea.

Powered by

About Howard Owens