Supply Chain Matters featured a previous commentary specific to global consumer electronics manufacturer Sony, and its recent report of fiscal year-end earnings. We noted, as did others in media, that forty of Sony’s top executives, including its CEO, decided to forgo end of year bonuses amounting to 30-50 percent of their compensation because the company failed to keep a promise to return the group’s consumer electronics division to profitability for the current fiscal year that ended March 30. We observed that many CEO’s and top executives are very comfortable with awarding themselves large bonuses and double-digit increases in total compensation in spite of operating results. Some have done so while taking major cost cuts from supply chain related operations.
As a means of more evidence, we further wanted to call our readers attention to an article published in the May 6-May 12, 2013 edition of Bloomberg Businessweek titled Some CEOs Are More Equal Than Others, which adds more credence to a growing skew in executive compensation. (paid subscription required for the full listing of rankings) Bloomberg editors subtitled this article noting that companies were supposed to be disclosing the pay gap between CEOs and their employees, but they have not.
Bloomberg staff compared the disclosed CEO compensation mandated by the Securities and Exchange Commission, including salary, bonus, changes in pension accrual and value of stock awards, with U.S. government data on average worker pay and benefits by industry. The result was a ranking of 100 companies with the highest CEO-to-worker compensation ratios. The ratios range from 1795 CEO-to-worker Ratio for the number one ranking to a 299 CEO-to-worker Ratio for the number 100 ranked company. In the context of the manufacturing and retail industries, the Bloomberg ranking of sectors ranked by CEO compensation bulge were noted as:
Rank 1- Communications
Rank 2- Industrials
Rank 3- Health care
Rank 4- Consumer discretionary
Rank 7- Materials
Rank 8- Consumer Staples
Upon further review, we placed a supply chain & B2B lens to this listing and noted some further observations:
- Three of the top ten ranking include retailers and/or service providers. JC Penny tops the list (with a 1795 CEO to worker ratio) but its CEO was recently discharged because of poor profitability performance among other issues. There are many retailers in the Bloomberg listing of CEO pay disparity and yet many of these retailers are scrambling to meet the new competitive dimensions of an multi-channel online world. Some others of mention: Target (#13), Wal-Mart Stores (#18), Macy’s (#20), Lowe’s (#74), Gap (#75), Kohl’s (#83), Home Depot (#92). Retailers are constantly challenged with razor thin margins yet it would seem that pay at the top provides a different set of measures.
- We contrasted the 2012 Gartner Top 25 Supply Chains with this Bloomberg listing. Nine of Gartner’s Top 25 appear in the Bloomberg 100 ranking, specifically in Gartner ranking order: McDonald’s (Bloomberg #66), Procter & Gamble (#72), Coca Cola (#22), Intel (#100), Wal-Mart Stores (#18), Colgate Palmolive (#87), Nike (#8), Caterpillar (#73), 3M. Either their supply chains teams contributed to CEO performance objectives or other financial metrics such as overall supply chain cost, return-on assets, major supply chain outsourcing or other factors led to the Gartner ranking.
- We have noted the many challenges and dysfunctional nature of pharmaceutical and health care supply chains in numerous Supply Chain Matters commentaries. Industry players in the Bloomberg listing include McKesson (#12), Medtronic (#31), Pfizer (#47), Abbot Laboratories (#53), Baxter International (#70), CVS Caremark (#77).
- Readers of this blog are well aware that we have featured numerous commentaries related to the continuing global supply chain challenges of Boeing. Yes, that company is listed as #86 with a 314 CEO to Worker Ratio.
- Finally, the Bloomberg listing feature two global transportation and logistics services providers: FedEx (#67) and UPS (#88).
While these types of CEO pay rankings come with a lot of built-in, subjective or other emotion, the take-way for us was contrasting the gesture of the Sony executive team with many of the companies listed in the Bloomberg Businessweek ranking of CEO compensation ratios.
Perhaps more gestures of CEO and senior executive pay for performance actions are in order.
Then again, CEO’s march to their own set of norms and expectations.
For our part, we will highlight for our readers, any supply chain or B2B developments (positive or not so positive) that involved companies with the top CEO pay disparity rankings.