THE CEO PAY MACHINE

A former CEO of two corporations shatters the myths and explains the stupidity regarding astronomical salaries at the top of the business world.

Clifford, who served as CEO of King Broadcasting Company and National Mobile Television, expresses outrage that boards of directors have fallen into the trap of compensating CEOs with tens of millions of dollars annually without evidence-based reasoning. The author demonstrates that corporations could pay much less and that no CEO deserves an outlandish compensation package. After tracing the evolution of compensation for CEOs and delineating the factors that lead boards of directors to approve them, Clifford offers detailed critiques of four corporations that pay their CEOs as much as $200 million annually despite mediocre results: Stephen Hemsley at insurer UnitedHealth Group, John Hammergren at pharmaceutical distributor McKesson, Charif Souki at liquid natural gas supplier Cheniere Energy, and David Zaslav at cable TV programmer Discovery Communications, who made $224 million in one year. Clifford explains the similarities (and minor differences) among the “pay machine” at each corporation, a machine that operates to the detriment of stockholders and harms morale of employees, many of whom make as much as 500 times less than the CEO. The author is especially puzzled by the myth that CEOs, most of whom are already highly motivated, require stupendously large bonus compensation to become even more motivated. Occasionally, Clifford expands his focus to tell readers how the ills of the pay machine extend beyond any given corporation to harm all of society—e.g., the escalation of income inequality between the 1 percent and the remainder of the population. The author also provides a helpful glossary to define such terms as “amortization,” “golden parachutes,” “realized compensation,” and “stock appreciation rights.”

A well-thought-out, clearly written exposé marred only by some repetition of the main points.