Don't you love it when they suggest it's a pyramid with the top people getting paid all the money

I was speaking with a friend and colleague recently and I was taken back by their inference that direct selling involved the people 'at the top' getting paid all the money and the people 'at the bottom' getting very little of the money.  Now this was a well-educated person, however they felt the industry needed to change to 'fix this'. I didn't debate or challenge this person, because I respect their interpretation.  Their inference, like many, is that conventional main-stream business models are better because apparently, the people at the top don't make all the money, and the people at the bottom share more equally in the distribution of wealth. Now that's something I don't see the rationale of...considering the below:

Average Compensation of CEOs of 367 US Firms

2004 - $11.8 million*
2003 - $8.1 million
1990 - $2.0 million

The 590% increase in CEO compensation from 1990 to 2004 far outstripped the increase in performance in the stock market, inflation, employee wages or the minimum wage.


*This average rises considerably when then number of top corporations is reduced to say the top 100 corporations.


According to United for a Fair Economy and Institute for Policy Studies (2007): "If the minimum wage had risen as fast as CEO pay since 1990, the lowest paid workers in the US would be earning $23.03 an hour today (2006), not $5.15 an hour."


The Ratio of Average CEO compensation and Minimum Wage Worker in the US 1965-2005


2005 - 821:1 (Worker- Minimum wage $5.15/hr plus benefits)
2004 - 725:1
2003 - 540:1
2002 - 416:1
2001 - 668:1
2000 - 815:1
1992 - 319:1
1989 - 207:1
1978 - 78:1
1965 - 51:1

Source: Mercer Survey of 350 large industrial and service firms conducted for the Wall Street Journal

Examples of Large Executive Compensation in the US


On January 3, 2007, chairman and CEO of Home Depot Inc. Bob Nardelli's severance package was $210 million.


InterActive Corporation (IAC) chairman and CEO Barry Diller's 2006 compensation was $295 million. (Also see our article CEO calls Corporate Governance Researchers Birdbrains!)

David H. Brooks, chairman and CEO of DHB Industries made over $250 million as DHB profited from supplying bullet-proof vests to US Marines in Iraq despite 5,000 vests being returned as ineffective in May 2005. His base salary of $70 million in 2004 was 13,000% more than his 2001 compensation of $525,000. In 2004, Brooks sold company stock worth about $186 million, initiating a drop in DHB’s share price from more than $22 to $6.50, after which he was put on "administrative leave".


Exxon Mobil's chairman and CEO, Lee Raymond's 2006 retirement package was about $400 million.

The CEOs in the examples above also held the position of chairman of the board of directors, a board which must according to fundamental corporate governance principles - and often by law - fulfill their fiduciary duties, monitor the performance of the CEO, hold the CEO accountable, represent the interests of the shareholders in the boardroom, and act in the best interests of the corporation's shareholders.

Lucian Bebchuk and Yaniv Grinstein of the Harvard Law School write in their paper The Growth of Executive Pay that during the period 1993-2003, executive pay "has grown much beyond the increase that could be explained by changes in firm size, performance and industry classification."

Who's the 'pyramid' now?