Despite our actions as consumers to wait in line to eagerly turn over hard-earned cash for the latest holiday toy, in principle at least, there are two things we love to hate: Wal-Mart and CEOs.
Wal-Mart has been become unintentionally branded as a soulless, shameless exploiter of workers both here and buried in their overseas supply chain. We will not debate this here and now, for this is the time and place to use them as a most-recognizable company who pays their CEO well.
Total compensation for this position was US$31.6 Million the last fiscal year.
How much is a CEO worth? Maybe this is a bit too subjective to be attempt discussion among such disparate views of wealth these days, so here’s a more objective question: Is it justified by the degree of responsibility and results involved? This can easily be measured by how many employees there are to take care of, and the total business volume we’re talking about. And of course, the profits should justify at least part of the compensation, which is what bonuses are for.
So let’s hold our opinions and take an honest look:
According to their financial figures ending in January 2009, they did (in US Dollars):
$405,607 Million in sales;
$99,449 Million gross profit;
$13,400 Million net profit.
{Source: http://finance.yahoo.com/q/is?s=WMT&annual}
This means that the CEO sees less than 8 cents for every thousand dollars in sales, or 31 cents for every thousand dollars of gross profit and $2.36 per $1000 in net profit. That’s not a lion’s share. We could say it’s far more than any employee on the floor receives, but how many of them have anything to do with more than the sales in their one department of one store during their particular shift?
So let’s talk now about employees, because that is a major hot button of criticism, though we ought to start from the top down keeping with the numbers above.
Wal-Mart has approximately 1.3 Million employees.
{Source: Ethix Magazine, March/April 2008}
That means that for every employee the CEO is at least partially responsible for, he receives $24.31 a year. This may seem like a strange way to look at it, so let’s switch perspective from the bottom up.
If the CEO gave up his salary, and it was 100% invested equally among all the employees of the company he runs, and estimating an average of a 30-hour work week over the course of the year, the immediate raise in each person’s paycheck would be …
$.0156 per hour
Why are these numbers worthy of consideration? The current trend when setting “ethical” labor compensation policies is to limit the “disparity” between top and bottom, such that, for example, the top position cannot earn more than 30 times the lowest paying job in the company. So even ethicists (which you would think would strive for objective considerations whenever possible) have been measuring compensation “inequity” entirely arbitrarily, instead of sensibly — by the numbers.
If a manager makes 10 times more than a starting clerk, it is only fair to note they are probably resposible for a lot more than 10 of those clerks, and the sales and success of 10 or more departments, across three shifts each to boot. If a CEO makes a seemingly rediculous 100 times more than the door greeter, it’s not so rediculous when accounting for the number of people in either job description.
Consider a slightly less “Capitalistic” example: A professional athelete all but surrenders their life and health to entertain as many as 200 million people or more, yet we begrudge them small fractions of pennies on the dollar for the revenue generated at least in part by them personally.
The CEO of a major retailer — putting aside what you think of the company or its ethics — is an unshrugging Atlas making far more than the masses “under” him, and yet from a more objective perspective, the greater the swarm of worker bees, the more honey he can justify taking for himself. But that doesn’t sit well for some of us …
So why do we reject the above perspective? It is a simple equation with only two variables, work (measured in responsibility and result) and pay. Therefore there are only two possible objections in this line of thought. The first is that the pay is too great for the responsibility and result, which we debunked in spades. That leaves us with the second, a persistent, subconscious assumption bugging our “sensibilities”:
They don’t deserve it.
This is an emotional prejudice. We might shout that no one deserves that much for the labors of one man, no matter how ambitious or skilled, aside from any admitted jealously on our part. Perhaps we reject any economic Archimedes principle of leveraging capital and organized labor as unjust to those who didn’t think of it first or are unwilling to ply the fulcrum themselves. Maybe we can even argue that well, from the Ivy towers to the coffee shops. But in the end, we don’t want to believe they are truly WORKING for their compensation. We want to picture them as fat cats with cigars, as painted by the cartoonists of yore, circa the age of Upton Sinclair and Carnegie Steel.
But we’ll still fight amongst ourselves for that hot new toy.