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6-34 Ethics & Social Responsibility [CH 6

In the end, the only way the firm could prevent the takeover was to buy back the
stock held by Steinberg's firm, Reliance Financial Services Group. In exchange for his
$32 million profit and $28 million to cover his out-of-pocket expenses, Steinberg
pledged not to buy Disney stock for the next ten years. Many Disney shareholders
were enraged that they could not sell their shares for the premium price paid to
Steinberg and that the firm's market price actually dropped after the payoff was made
public.
As a result of cases such as this, companies now erect elaborate financial and legal
barriers to greenmail.

Executive Compensation
As workers get promoted to higher positions, their pay level also increases. It is no
longer shocking to see top executives earning more than $1 million a year in salary
along with special stock options and other perks that can bring them much higher
compensation. Chrysler's Lee Iacocca, for instance, started at Chrysler on a $1 annual
salary, plus stock options. Prior to leaving he had a base exceeding $2 million, and
accumulated enough stock options to reap more than $15 million in a year.

Chief executives of large firms carry a heavy responsibility and should be
compensated for what they do. However, when executive pay packages have exceeded
$100 million per year, such as with Jack Welch (former CEO of General Electric) and
Michael Eisner (CEO of Disney), or a Ken Lay (Enron), coupled with stock options
and additional compensations, some see these as acts of financial overreach. CEO’s in
medium and small sized firms have salary ratios that are about 15:1 to the average
wages of the workers.
The apparent randomness of executive earnings adds to the confusion about
executive salaries. A special Fortune magazine study found that a number of factors
influence executive compensation. Company size, performance, and risk, as well as
the level of government regulation, job tenure, and location (executives in New York
City and Los Angeles average 7 to 10 percent more than executives elsewhere in the
country) can make a difference in salary. Still, according to Fortune's study, statistical

analysis could rationalize only 39 percent of the variance in executive salaries.
CEO and executive pay are based on any number of elements, the principles being:
 Company executive pay across the industry.
 Performance goals as a measure of progress.
 Linking pay to return to shareholders.

In 1980 the executive pay was 42 times that of the average worker pay, a ratio of
42:1, and in 2018 executives of top 350 companies were receiving 278 times the pay
as the average worker’s pay, a ratio of 278:1. On average, in 2018, these top
executives received $17.2 million in pay. Employees working in those industries—
ranging from retail to technology and manufacturing—typically earned $64,500. As a
note for comparison some professional athletes in their entertainment roll on the court
or field are compensated on a ratio of 384:1, which is significantly more than their fans
and ticket holders earn, and much more that your teachers.
Logically, the better a company performs, the more its executives make; and some
executives will do well even if the company loses money. Many people think such
scenarios should be eliminated because they endanger the earnings of shareholders,
Thou shalt not covet thy
neighbour's house, thou who are the actual owners of the company.
shalt not covet thy Left-leaning economists, politicians, and other commentators frequently use the
neighbour's wife, nor his CEO-to-worker pay ratio as an example of why capitalism is inherently flawed and
manservant, nor his their arguments are always enriched with biased comments of “the rich getting richer
maidservant, nor his ox, and the poor getting poorer.” Yet, economic research indicates that when the Federal
nor his ass, nor any Reserve, at the direction of Congress, prints more currency, increasing the money
thing that is thy supply which inflates the dollar causing its purchasing power to decline, the value of
neighbour's. stocks to rise. Many executives are paid in dollars and stock options. The options are
—Exodus 20:17 set at a price, and when the Federal Reserve inflates the money supply then the
executive who is also compensated with stock receives the benefit of those increased
share values. It is the common worker, who is only paid an hourly or salaried wage

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