Conference 7.286::digital

Re .0

Here is some related info, I think this has the figures you need.

Craig

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Note 1431.82            tax havens and US manufacturing.                82 of 99
SYSTEM::COCKBURN "Airson Alba Ur"                    49 lines  29-APR-1991 07:02
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>            <<< Note 1431.10 by SYSTEM::COCKBURN "Airson Alba Ur" >>>

Re my earlier comments about US wages:

>It is expensive to produce products in the US because of the high
>wages there (amongst other things). The US is pricing itself out of the
>world market. We live in a world where Japan has one of the worlds

>not the dominant economy you pay the price. Price yourself out the
>world market and you lose jobs. Lower your wages and you might get
>some jobs back. If US employees were paid a European salary you might
>not be losing so many jobs as you are. 

You might find the following article interesting, it appeared in the UK
Times today, P21

US Bosses' pay soars above staff

The pay gap between corporate America's shopfloor and its top floor has
risen to unprecedented levels. 

According to the latest American executive survey compiled by Businessweek
and Standard and Poor's Compustat services, the typical chief executive made
85 times the pay of the average factory worker last year, compared with 17
times shopfloor pay received by bosses in Japan.

The best paid American executive was Stephen Wolf who runs United Airlines,
which started flying into Heathrow this month. His pay, bonuses and share
options totalled $18.3 million, in a year when profits fell 71%, which is
1,300 times the starting pay of a stewardess which, at $14,382 has not been
increased for five years.

The $11.2 million package of Michael Eisner, Walt Disney's chief executive,
meant he earnt more in a day than the average Disney employee earns in a year.
And Lee Iacocca, the Chrysler chief received a 25% rise in compensation to
$4.8 million, despite a near 80% drop in profits.

...

America's leading institutional shareholders are concerned about executive pay,
and many are seeking to ensure that compensation is set by a committee of
independent directors.

Over the past decade, Businessweek says, the pay of chief executives has
jumped 212%, while profits have risen 78% and the pay of a factory worker
by 53%, and engineer by 73% and a teacher by 95%.

A Boston Red Sox Pitcher earns $5.3 million a year, whereas Norman
Schwartzkopf earns $0.104 million a year.

    Fortune magazine has been on a crusade about this for the last several
    years, regularly reporting on the salaries of the top couple of
    executives in their "Fortune 500" companies.  According to their
    analysis, there is no discernable connection between U.S. executive
    salaries and how well their companies do by any normal measure of
    business "goodness".  Only trend they find is that, for any given
    industry, the company with the highest paid executives is usually NOT
    the best investment, from either a short or long term perspective. 
    
    Business Week recently published an article with similar conclusions. 
    I noticed that Digital's (well, Ken and Jack's) ratings as far as
    executive pay versus return to stockholders was not too good.  (A
    couple of years ago Ken and Jack rated average for the industry.)
    
    One interesting article in the Fortune series looked at the "reality
    gap" between executives making millions and the regular employees.  It
    can get pretty gaping, and it can do major damage to both morale and
    eventually to a companies ability to operate.  It can also have a more
    subtle effect, as executives lose touch with the reality in which most
    companies have to sell their goods.
    
    /Dave

    
    I believe it was reported the other day that the CEO of Time Life just
    took home $78,000,000, making him now the highest paid CEO in the U.S.
    

    To a large extent, it's simple unmitigated greed.  Many of these
    corporate exec's don't give a good healthy crap about the company or
    its people.  They are in it for maximum bucks.  And these are the same
    swine that will whine about the greedy unions.  Gag!!  The next thing
    they'll think they are on the same level as Madonna-the-tramp or
    illiterate basketball players.  The nerve.
    
    Finally, how long are we gonna have to hear about high American factory
    wages and pricing ourselves out of the market?  That old dog don't hunt
    no more.  American factory wages are well below several European
    countries...not to mention Japan.  Find another excuse.

    Get a ROPE, get a ROPE..........
    

    re: .0
    
    The salaries of Digital's top level folks doesn't disturb me very much.
    However, the salaries of the top dogs at the company I left to come
    here was another story...
    
    I worked at a BIG media firm which owned oodles of newspapers,
    billboards, radio stations, and TV stations.  Back in '85, the top man
    was getting $1.333 million _BEFORE_ perks and expense accounts.  His top
    two henchmen combined made _exactly_ his salary.  So the top 3 made
    $2.667 million before perks that year.  I won't go into the 2-floor
    office suite (atop a skyscraper with a view of the Washington Monument)
    with snakeskin wallpaper, private dining room, and a fountain in the
    suite itself!  (Suite occupants: the 3 men and their personal staffs)
    
    As a corporate troubleshooter, I travelled to many of the smaller
    properties.  I needed to get a simple telephone to test a modem -- they
    couldn't afford it (seriously!!!).  Their budget was _SO_ small that
    when the newspaper's Controller had her desk calculator go haywire, she
    had to use her OWN from HOME for the ENTIRE YEAR.  She finally had to
    put the Publisher on notice that she intended to withdraw her
    calculator on January 1 so that she could get a replacement.  I won't
    even BEGIN the subject of what SALARIES were like for the properties...
    
    And this was not an isolated incident.  The corporate bigwigs survived
    on the sacrifices of the "little people".  Whenever they purchased a
    new newspaper, they would fire about a third of the staff and tell them
    that they had better increase revenue ASAP!  And this was standard
    operating procedure...
    
    I'll leave off the many details (and many, many other stories) before
    my bloodpressure begins to soar...
    
    Bottom line:  Digital's compensation of top managers is not a concern
    to me.  I've seen _REAL_ abuses of this sort outside of this company.
    
    -- Russ
    
    PS/ To finish the phone story: I ended up buying a reconditioned Bell
        phone for $25 at a local Kmart and _gave_ it to the site.  As a
        "corporate" employee, a $25 expense wasn't even questioned; for the
        newspaper, though, such a trivial expense was _IMPOSSIBLE_ to
        squeeze into their narrow little budget.  Every dime that could be
        saved had to be sent to corporate -- to line the pockets of those on
    	top.

    Keep saving the bucks employees, so that we can support America's Cup!
    In the USA the common employee is way underpaid. I could not make a
    living in the States. I came here and now I can live.
    
    That the K.O. makes his money that is understandable, it's his company,
    does it have to be that high. Whit this much money, could he not
    support the America's Cup himself?
    
    It feels that something is out of balance. I have to come to
    Switzerland to be able to support my kids with their studies. Today,
    you are forced to send intelligent kids in expensive colleges and
    universities to get a decent education. You scrape together every penny
    to pay for it, then you think, one tenth of K.O. money would pay for
    both of my kids education!
    
    This notesfile is depressing. Well, good luck to the future.
    	

    re .7
    
    >>  That the K.O. makes his money that is understandable, it's his
    >>  company, ...
    
    Bull!  K.O.'s personnal holdings amount to less than a fraction of a
    percent of this company's outstanding stock.  (Understand, that even at
    that it makes K.O. a very wealthy man!)  It is not K.O.'s company.
    
    I'd be hard pressed to justify K.O.'s salary -- this year, or the past
    several.

>    >>  That the K.O. makes his money that is understandable, it's his
>    >>  company, ...
>    
>    Bull!  K.O.'s personnal holdings amount to less than a fraction of a
>    percent of this company's outstanding stock.  (Understand, that even at
>    that it makes K.O. a very wealthy man!)  It is not K.O.'s company.

The September 1990 Notice of Annual meeting indicates that Ken Olsen
owns 2.63 million shares of DEC stock.  The average number of shares
outstanding during fiscal 1990 was 122.56 million shares.
That leaves Ken with just over 2% of the Company's stock, considerably
more than "a fraction of a percent."
    
The Notice further lists Ken's "cash compensation" (exclusive of stock
options and pension) as $982,452.  He also gets $21,000 per year plus $1000
per meeting as a member of the board of directors.

From mid-1987 to mid-1990, Ken exercised options on 60,000 shares of stock,
realizing a profit of just over $9 million.

    The dialog here misses a couple of key points:
    
    1.  The pay of senior executives is set and ratified by the board of
    directors.  Executives get what they can, just like big league ball
    players - it is a free market. Boards are accountable to make
    executives accountable, or else they can/should be thrown out.  How
    often as a stock holder do you even return the proxy vote on board
    elections - much less look for new board members?
    
    The sad fact is that so many boards interlock, with executives sitting
    on each other's boards, that accountability suffers.
    
    2.  Senior executives work crazy hours/often have family life suffer. 
    These jobs are often 70-80 hour week assignments, at least 6 days a
    week. In my experience at DEC, this norm applies to our senior
    management also. 
    
    3.  The amount of senior management talent that can run multi-billion
    enterprises seems awfully limited.  For every 5 billion dollars in
    size, there are few qualified candidates.  With huge companies and complex
    strategies, throwing out the CEO is tempting, but where is the
    guarantee the next person can do better?
    
      
    

re: .10

These are actually some good comments, not because I agree with them, but
because they reflect how a lot of folks think about this.
    
As to 1., the statement that "it is a free market" is not true.  I was about
to jump in and say why, but the answer is already given.  It is that the boards
are typically controlled by an elite few who are interested in keeping their 
own salaries very high.  I would venture that it is nearly impossible to rout 
board members that are members of such elite groups.


As to 2., the number of hours worked and stress of the job does not distinguish
senior executives from lower ranks.

As to 3., paying a lot of money to senior management has nothing to do with
attracting and keeping talented managers.  If so, we would be importing CEOs
from Europe and Japan who are heading companies that are whipping companies
in the US.  The sad fact is that the reason that this does not happen is
because those outside managers are not members of the elite organizations that
control the boards ... yet.  As a matter of fact, the current trend of
isolating pay increases from performance (bad or good) has created an even
wider disassociation between the money paid and services rendered by senior
managers.


Steve