I was dining the other night with my favorite retired movie executive (not only is he my favorite, he's the only one I'm friends with.) He shared his opinion about executive pay in particular and working persons' in general:
"Movie execs are way overpaid. They get a base salary, they get bonuses, they get stock options. They usually control the company's board of directors and mostly get everything they ask for, because the directors mostly owe the exec their directorship.
"And when they take stock options, they know how to influence the stock price so that they get the option at a lower point, and exercise the option at a much higher point. It's kind of a racket. [Obviously, this strategy hasn't worked too well over the last six or eleven months ... -- SRH]
"But this deal of $10 million in annual pay, options and bonuses? $20 million? $60 million? It's silly. I keep hearing: 'Oh, we've got to pay that to attract top talent,' but I've never believed it. There are plenty of qualified people who would love to have the job and get paid three hundred thousand or half a million a year. We've gotten into this mode where executives just assume they'll be getting a big pay package because every other executive gets a big pay package. It's the norm. And it's silly.
"I've thought for a long time we need to pay more for workers who are doing really tough, crucial jobs, teachers for instance, and less to executives who don't work nearly as hard and delegate a lot but make way more money because they're in a strategic, money-making place.
I know it's not going to happen, given the way society's set up, but it should happen. Because the pay structures we've got now are nonsense."
This from a guy who made a goodly amount of dough as an exec and is now comfortably retired. Clear-eyed but cynical. My kind of homo sapien.
But let's do a few math and history constructs, and see how things have stacked up through time.
Let us journey back to a halcyon time when the movie industry was roaring, earning money hand over bushel basket, when movie companies turned out nothing but hits and studio lots were paved with gold.
The time was World War II, and every major film company -- 20th Century-Fox, M-G-M, Warner Bros., Paramount -- was well into the black. The U.S. citizenry was fully employed winning the war, and everyone had cash for a theater ticket. It was no accident that the highest paid exec in the United States was one Louis B. Mayer, who made a whopping $1,250,000 per year.
But good old L.B., in the modern age, would have lost his standing as "best paid executive" to another high-flyer named Barry Diller:
The New York Times asks the question whether one-time Hollywood mogul Barry Diller -- presently chairman & CEO of IAC/InterActiveCorp -- is the highest paid chief executive in America...
[O]ne recent study that looked at a broader universe of companies estimated [Diller's] total compensation last year at $295 million -- while another recent survey -- using a different calculation -- figured he was paid $85 million" ...
So how did other U.S. executives -- non-movie executives -- do in the same time frame (2006-2007)? Pretty well, thank you.
The chief executives of America's 500 biggest companies got a collective 38% pay raise last year, to $7.5 billion. That's an average $15.2 million apiece. Exercised stock options again account for the main component of pay, 48%. The average stock gain was $7.3 million.
Good thing they got in before the downturn. Or most of these folks would have done worse than Louis.
But reading the above, there's clearly a difference of opinion between journals about who's got bragging rights for highest paid boss guy. Diller's up there, but of course there's this:
The highest-paid boss of the 500 companies we tracked: Apple (nasdaq: AAPL - news - people ) chief Steve Jobs. He drew a nominal $1 salary but realized $647 million from vested restricted stock last year ...
Steve is another one who's lucky to have gotten a big pay day from his options before everything tanked. But forget which of these two is on top. The interesting thing is, L.B. Mayer's paycheck, adjusted for inflation, would be right in the middle of the executive pack. Not the highest anymore, but certainly nothing to sneeze at.
So what about, you know, school teachers? How they have made out from 1941 to now?
In 1941, the average school teacher received a wage of around $2510 a year. (I'm extrapolating a bit from this report, but the range for white school teachers was around $1500 to $2600.)
And today? The average yearly salary is $51,493, with the low end at $40,800 and the high at $60,485.)
So what do you know? Adjusting for inflation, teachers in 2007 did better than their 1941 counterparts! Whereas the instructor who made $2510 around the time of Pearl Harbor would make $34,989.61 in 2007 dollars, his or her real world counterpart would be collecting 51 grand, a $16,000 bonus.
Not quite the bonuses that Steve J. and Barry D. pulled down in 2007, but hey! It's something!
However, I think the Wise Old Exec is going to have to wait awhile before his hope of school teachers overtaking American executives in annual salary becomes reality.
Like maybe three or four thousand years.