Saturday, March 01, 2008
Louis Gallois: The Triumph Of A Socialist CEO
Are there any CEOs out there who aren't greedy bastards these days? If there are, they're few and far between.
Over the past quarter century, CEO pay has skyrocketed in the U.S. In the 1960s, CEOs made around 40 times what rank-and-file ordinary workers earned. Today, CEOs make over 400 times what the average worker earns. (And they keep much more of what they make, thanks to income tax laws that are vastly less progressive than they were in the 1960s).
Business schools and economists routinely argue that exploding CEO pay is "inevitable" and that it's all a normal (and unavoidable) aspect of capitalism. Titanic pay packages are necessary to attract the best talent, they argue.
But there's at least one CEO out there who defies all these conventions: Frenchman Louis Gallois, the CEO of EADS, the European defense company.
A CEO like Gallois, 64, would be inconceivable in any American corporate boardroom (where the belief that "greed is good" has been elevated to the status of a religion these days).
After all, Gallois is a lifelong socialist. He once read Das Kapital, cover to cover. He's a business leader who has earned the respect of the workers at the companies he has run (including SNCF, the French rail company). And as The Financial Times once pointed out, Gallois has "disdain for money and the trappings of power."
When Gallois was named the CEO of EADS, he insisted on retaining his old SNCF salary of $273,000/year. EADS had offered him an annual salary of $3.4 million. To this day, Gallois retains his old salary and gives the balance to charity.
Can you imagine any American CEO voluntarily accepting a $273,000 salary, when they could be earning $3.4 million a year?
These days, American CEOs are busy laying off workers by the thousands and exporting jobs overseas, and pulling down fantastic pay packages. As long as they make Wall Street happy, their creed is: screw the workers (and society as a whole). While U.S. CEOs make over 400 times what the average worker earns, in Europe that multiple is a mere 22. In Japan, the gap is even narrower: the average CEO there makes only 17 times what the average worker makes.
In fact, these days, U.S. CEOs don't even have to make Wall Street happy to rake in their huge salaries.
Take Peter Cartwright of Calpine, a maker of gas-fired power plants. In 2005, Forbes reported that Calpine's average annual return to shareholders over the previous six years had been minus 7 percent. During the same period, Cartwright pocketed an average of $13 million annually.
Getting back to Gallois. Sure, he voluntarily pockets a modest salary. But what about his performance as CEO of EADS?
As it turns out, times are very good for EADS right now. Indeed, the future looks bright for the company.
On Friday, EADS scored a stunning upset victory over its rival Boeing with a $35 billion contract to supply the U.S. Air Force with refueling tankers. The Financial Times noted that the huge contract could ultimately be worth more than $100 billion.
For Boeing CEO James McNerney, Friday's news was a crushing blow.
But at least McNerney can take solace in one thing: his titanic CEO pay package. As The New York Times pointed out in 2006, McNerney has a pay package worth more than $52 million. And you can be assured that he won't be handing the vast majority of that fortune over to charity to live on a modest salary.
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