A Wall Street Journal report shows top companies are paying their top leaders almost 1% less in 2009 than the previous year. Leading the drop was Dish Network (DISH), where founder and CEO Charles Ergen suffered the harshest drop in pay across the entire WSJ survey — a drop of 92.5% to $623,100 a year in total compensation.
The recent downturn in CEO pay comes after a 3.4% drop for executive compensation in 2008 as the recession took its toll and political outcry made big bonuses unpopular. It’s natural to see companies cutting back in leaner times — even a bit refreshing to see that those on the top of the heap are sharing the pain of the little guys who have had salary freezes or furlough days. But what does it say about a company like Dish Network when it slashes CEO pay by over 90% — even as DISH share prices have doubled in the last year.
While the $600k salary of CEO Ergen is still 20 times the average salary of an adult American, it’s at the extreme bottom of the pay scale for the high-stress job of running a publicly traded company with a $9 billion market size and almost $13 billion in annual revenue. And it’s not like Ergen has been asleep at the wheel — DISH stock is up about 125% since the March 9, 2009, lows and in its latest quarter topped Wall Street earnings per share estimates by 25%.
So why would DISH pay its CEO so little? Well, perhaps it’s because as the founder of Dish Network that Ergen has more of an interest in the success of the company than padding his own bank account. Cable providers like Comcast (CMCSA) and Time Warner (TWX) are virtual monopolies, and satellite rival DirecTV (DTV) boasts 30% more customers – 18 million by the latest estimate to 14 million at DISH. Putting the company’s money to work toppling these rivals may be more important to Ergen than anything else.
Another idea would be that the CEO is simply playing a public relations game akin to Citigroup (C) CEO Vikram Pandit took a salary of $1 without any bonuses after a massive government bailout, or when General Motors CEO Rick Wagoner made a similar $1 pay pledge. While 600 large isn’t peanuts, it’s certainly not the $52 million pulled in by Occidental Petroleum (OXY) CEO Ray R. Irani.
The final theory — and one that’s more disturbing for DISH shareholders — is that the company either doesn’t have the cash or doesn’t have the inclination to pay its leadership top dollar. That could signal trouble down the road if its true, because Dish Network is going to need to woo the best and brightest executives to fend off cable rivals and satellite leader DTV. Settling for second-tier talent is no way to become the best in the business.
Pay is all relative. Obviously a cashier should make less than a CEO because of the difference in experience, education and skills for the job. And in the world of CEO pay where top execs routinely pull in seven and eight figures, $623,100 seems like chump change.
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