Pay Gap Between CEOs and Top Lieutenants Raises Eyebrows

Last Updated Oct 8, 2007 2:28 PM EDT

Pay Gap Between CEOs and Their Top Lieutenants Raises EyebrowsYesterday the Financial Times reported the results of a survey it conducted with Salary.com comparing the compensation of CEOs and their deputies. The results are interesting:
The average total compensation for a S&P 500 chief executive was about twice as much as the second most highly paid executive last year... However, at SLM, the student loan group known as Sallie Mae, the pay of Thomas Fitzpatrick, chief executive, who resigned in May, was more than 10 times that of June McCormack, his executive vice-president.
At more than 30 other companies, the gap ranged from four times to seven times.
It's not only managers climbing their way up the corporate ladder who are taking note of the looming gap between CEOs and their top lieutenants. The Securities and Exchange Commission has also taken an interest. The FT reports:
The Securities and Exchange Commission is believed to have asked a number of companies to explain the reason for large pay gaps between top executives, as part of a review of corporate pay.... The Council of Institutional Investors, whose members have more than $3,000bn under management, has also voiced concern at large disparities in pay between executives.
So what's the problem when the gap between the CEO and senior managers becomes more of a chasm?
Christopher Ailman, who manages more than $170bn for the California State Teachers' Retirement System, believes that a yawning gap points to weak corporate controls. "Paying chief executives an excessive amount relative to their number twos is a warning signal that the chief executive may have the compensation committee sewn up and that the board is not doing a good job of the succession plan," he says.
Others warn that funneling a large part of the executive compensation pool to the boss can damage shareholders by demoralizing senior management and future chief executive candidates.
How large is the gap at your company?

(Image of mind the gap sign by Presty, CC 2.0)

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    Jessica lives in London where she works as a freelance writer with interests in green business and tech, management, and marketing.