I joked a couple of weeks ago that Pope Benedict XVI must be reading my blog. I’ll tell you who aren’t reading it: Wal-Mart’s chief executive officer and its board of directors. If they are, they’re not paying attention. (Chick here, here, here and here for what they missed or ignored.)
Wal-Mart’s CEO earned over $29 million in compensation for 2007, a 27% increase over 2006, when company profits were up only 12%. Wal-Mart was started as pretty much a country store by Sam Walton, who continued to drive a pick-up truck until his death. Wal-Mart will still try to market its rural roots as it invades small communities, while closing the doors on the small businesses there that can’t compete with W-M’s giantness.
The company offers low prices always. It counters critics with the argument that its low prices (which are the result of being so big and, thus, able to buy in quantities that allow it to charge lower prices than small businesses can charge) help low and middle income families who are Wal-Mart’s principal customers. There’s validity to that argument. Wal-Mart wouldn’t be as successful as it is if a lot of people didn’t shop there because of its low prices (which are sometimes more perception than reality).
Going back to my “No Shame” posts referenced above, it just seems weird–maybe wrong (not in a legal sense, although “wrong” may have no meaning anymore outside the legal context), at least, shameful–for the CEO of a company that makes its money off people who live from pay check to pay check to be paid $29 million–in one year. That’s why the Lilly Ledbetter Fair Pay Act (click here and here) will become law sooner or later. That’s why I’d bet, with a new President and enough change in Congress, we’ll see a new wave of employment legislation that the likes of Wal-Mart’s CEO will denounce as being bad for business. And he’ll be right. It will be bad for business–but no worse than a CEO who makes $29 million per year.
Wal-Mart is already dealing with what huge executive compensation can precipitate: union organizing noise, the largest class action in history, and lots of criticism from corporate watch-dog groups. So, maybe the big dogs at W-M have decided to go ahead and pay themselves what a lot of other big dogs make. After all, W-M big dogs work for the biggest American company there is.
To be honest, I’d take $29 million if the Wal-Mart board offered it to me, as would any Wal-Mart shopper. I guess Pogo was right: “We have met the enemy and he is us.”
2 responses so far ↓
1 Jim M. // Apr 30, 2008 at 1:48 pm
I can’t believe no one has commented on this post yet. While I agree that $29 million is an extreme amount of money to pay one individual, how can it be any more obscene than the pay that professional athletes receive? Only a few receive the extreme salaries while most pro athletes make very good wages, well above the average American. But the best athletes are paid the excessive amount because of the money they generate in ticket sales, television revenues, team apparel, etc. There is a return on the investment. Walmart and most large companies reward their top executives because of the actual or potential return on investment. The fact that Walmart’s sales include purchases by lower income people and welfare recipients doesn’t hold water either. Walmart should be credited for keeping products at their lowest prices so those people, and the rest of us common folks, can afford them. If you compare gross revenues of Walmart to the earnings of their CEO, the investment is much less as a percentage when compared to a professional athlete’s earnings vs. their team’s revenues. We should all aspire to achieve the highest wages and earnings that we can. We have to; we’re the ones paying the way with our taxes!!!
2 John Phillips // Apr 30, 2008 at 2:30 pm
Well, I’m glad you commented. I wouldn’t expect everyone to agree with the point of view I expressed in this post, and I’m glad you expressed a different one.
To some extent, this isn’t worth talking about, because we’ve gone so far past what is reasonable. We’ve gone way into, to use your term, the obscene. We’re not about to go back, but there are times when I need to mouth off.
While I agree that some athletes’ salaries are as ridiculous as that of W-M’s CEO, the theory for paying them what is obscense holds up better in the sports world. In my opinion, it’s much easier to measure what a superstar athlete is contributing and how much money in gate receipts he’s actually responsbile for. Michael Jordan increased the gate receipts wherever he played, not to mention being responsible for all Bulls’ games being sold out.
Much harder to do in the business world. I doubt that Wal-Mart’s success has all that much to do with the CEO’s performance. In any event, when a company’s profits are less than they were the year before, it doesn’t make sense to me that the CEO gets a whopping increase in compensation. It also doesn’t make any sense that if Wal-Mart had a bad year and the CEO was fired, the CEO would be paid millions in separation pay, which I’m sure he would.
Thankfully, we live in a free country. Capitalism has proven to be the best economic system we’ve found so far–at least, that’s what we keep saying. I wonder sometimes how long that will last when the income disparity between the top dogs and the common folks–the Wal-Mart shoppers–grows wildly from one year to the next.
As I said, we’re way beyond talking about this. It’s the way it is, and people making gazillions of dollars aren’t going to give any back. If the way all this works changes, it won’t be because we say it’s ridiculous, obscene, wrong, shameful or whatever that people at the top earn so much money. It’ll be because the system collapses.
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