Monday, February 04, 2008

What About Excessive Athlete Compensation?


Sports Illustrated--For the fourth straight year, Sports Illustrated set out to rank the 50 top-earning American athletes (taking into account on and off the field income), and it's no surprise to see the familiar names at the top of the list (see chart above, click to enlarge). The most obvious? Tiger Woods has reached an otherworldly plateau of nearly $112 million. Boxing is back from the dead for now, thanks to No. 2 Oscar De La Hoya, and the Shaq and Kobe rivalry lives on.

Half the list is made up of NBA players, while only 12 baseball players and five football players made the cut. There were three NASCAR drivers and just one woman (welcome, Michelle Wie!)


NEW YORK (AP) - An Associated Press calculation shows that compensation for America's top CEOs has skyrocketed into the stratospheric heights of pro athletes and movie stars: Half make more than $8.3 million a year, and some make much, much more.

Comment: Average compensation in 2007 of the top 50 athletes was $23.4 million, and median salary was $19.4 million. Median salary for CEOs in 2007 was only $8.3m for the 386 companies in the AP study referenced above (obviously a larger sample than for the SI athlete list).

Question: Why is it that when CEO salaries "skyrocket into the stratospheric heights of pro athletes," CEO salaries are condemned as "excessive?" Where is the outrage about athletes' salaries? After all, athletes made the stratospheric salaries before the CEOs did, so shouldn't those salaries also be considered excessive?

Based on Google searches, apparently not: Search for "excessive CEO compensation" and you'll find more than 3,000 references. Search for "excessive athlete compensation," and you'll find 0.

Update 1: See previous CD post on "excessive celebrity pay."

Update 2: Google search for "overpaid athletes" = 12,600 hits. Google search for "overpaid CEOs" = 8,530 hits. Thanks to an anonymous commenter.

20 Comments:

At 2/04/2008 6:10 AM, Anonymous richard said...

Search for "excessive athlete compensation," and you'll find 0.

Actually, you'll find 2.

Just kidding,

;-)

 
At 2/04/2008 7:22 AM, Blogger juandos said...

Hey Richard:

Your comment struck a chord of interest and I did look it up...

I found this posting dated Nov. 19, 2003: CEOs Are Ridiculed for Huge Salaries: Why Aren't Athletes and Entertainers? on the Knowledge @ Wharton (freebie sign up) so you actually stumbled over somthing that's really interesting...

 
At 2/04/2008 7:58 AM, Anonymous Anonymous said...

Maybe it is because the athletes aren't perceived as being able to excessively influence their compensation committees?

The paying public votes for various athletes compensation packages through their actions. CEO compensation is under no such free market scrutiny.

 
At 2/04/2008 8:09 AM, Anonymous Machiavelli999 said...

Lol, anonymous.

Tell that to Merryl Lynch's recently departed CEO.

 
At 2/04/2008 8:15 AM, Blogger Abby said...

I'm an editor for seekingalpha.com, and would appreciate if you could contact me at your earliest convenience, acarmel@seekingalpha.com.

 
At 2/04/2008 8:26 AM, Anonymous Anonymous said...

"...nearly half of the Fortune 250 companies received executive pay advice from consultants that were providing much more lucrative services to the company..."

http://www.financialweek.com/apps/pbcs.dll/article?AID=/20080201/REG/300249348

 
At 2/04/2008 9:10 AM, Blogger Walt G. said...

Who cares what athletes make? If ticket prices get too high, just stop going to the game. If a sports team goes out of business, too bad.

Publicly held companies, however, are supposed to be answering to the stockholders. If CEOs are performing well and increasing stockholder equity, then, they are worth their money. I think the big problem that gets all the attention is the CEOs who get paid a lot of money to come to a company who then get paid a lot more money to leave after poor performance.

Stockholders expect their board of directors to look out for their best interest and not the CEO’s best interest. Is that really too much to ask?

 
At 2/04/2008 9:40 AM, Anonymous Anonymous said...

Mark,

I've always also wondered why nobody ever comments on "excessive entertainer compensation" either. I often hear actors and muscians criticize CEO compensation. Wonder what we would find if we shined the light on them?

 
At 2/04/2008 10:11 AM, Blogger Walt G. said...

I don’t see how anyone can compare compensation between private and public companies. It’s really nobody’s business what the compensation is in private business. It’s everyone’s business what the compensation is in a public business. If a company decides to go public, they give up ANY privacy rights. Many of the problems nowadays stem from public companies trying to hide or distort legally required information.

 
At 2/04/2008 10:12 AM, Blogger Mark J. Perry said...

Anon: See update on this post, I have a link to a previous post on "excessive celebrity pay."

 
At 2/04/2008 10:29 AM, Anonymous Anonymous said...

Many sports teams are owned by publicly traded companies. Also, what if the private company is receiving public funds, such as Blackwater or other private contractors? Aren't there salaries also then our business? It seems that there would be a lot of room for abuse with no transparency.

 
At 2/04/2008 10:42 AM, Blogger Charles Slavik, CPT*D said...

If you serach Google for the term "overpaid athletes", which is the terminology most used on the sports page, you get 30,000 hits. Excessive compensation is the terminology used most often on the business pages.

 
At 2/04/2008 10:46 AM, Blogger Walt G. said...

Entertainers and CEOs are in different labor markets. CEOs and factory workers are in different labor markets. If we can compare the former; we can compare the latter.

Personally, I think they should all be compensated using the free-market system. Talents cost money; however, as a stockholder I expect full and legal disclosure. Stockholders deserve to know exactly what they are paying for.

Anon:
I think if a team is publicly owned, the compensation of the CEO/executives and not the hired help (athletes) would be disclosed. Athletes would be considered and listed as "labor" cost and potential stock buyers would use that as one piece of information to decide whether to make an investment in that team. As you implied, transparency is important in making choices of where to invest limited resources.

 
At 2/04/2008 3:30 PM, Blogger Marko said...

I think the answer to this has something to do with regular people being able to see what these people do. They know how great Tiger is if they ever tried to play golf, or how great Shaq is if they played ball in high school. Most people have no idea that the CEO of Boeing is maybe as great or better at what he does than Tiger in his field. Plus the whole class envy thing, and intentional lack of economic eduction in secondary and post secondary schools.

 
At 2/04/2008 4:04 PM, Blogger Walt G. said...

Although some people are born with extraordinary ability (not everyone can be Tiger Woods—he also works very hard at improving his game), everyone, with hard work, can do well and aspire for greatness. Too much time and effort is wasted worrying about what someone else has. At the same time, I don’t like spending my hard-earned money on investments where people are illegally hiding information from me or rewarding mediocrity instead of merit.

 
At 2/05/2008 1:06 PM, Anonymous patrickd said...

There is a pretty clear link between the income generated by the celebs/athletes and their salaries, which is not nearly as clear with the CEO's, expecially those whose performance is poor.

 
At 2/05/2008 8:26 PM, Blogger juandos said...

Walt G says: "Stockholders expect their board of directors to look out for their best interest and not the CEO’s best interest. Is that really too much to ask?"...

Is it to much to ask shareholders to vote with their wallets if they don't like the executive pay packages CEOs get?

 
At 2/06/2008 9:22 AM, Blogger Walt G. said...

I can deal with disclosed CEO pay. I don’t buy into the hype that CEOs are overpaid. It's the hidden stuff and pay for non-performance I have a problem with. I can't make rational purchasing decisions without correct information. Don't free markets require transparency? One of my mutual funds has/had a lot of Home Depot stock, and I’m still upset with the money they paid when that CEO left.

 
At 4/21/2008 8:28 PM, Anonymous Anonymous said...

It's all supply and demaand.... demand for teachers is, i dunno, lets say high... supply is also high. Demand for guy that can slam dunk over a few other guys and fill an areana is high, supply is limited. Then comes the supply and demand for watching the game... the supply of basketball games in NY area (Knicks and Nets) is decent, demand is high, so they get away with high ticket prices and forget the beers....! :D

 
At 4/30/2008 11:27 AM, Blogger Michael Ejercito said...

It’s everyone’s business what the compensation is in a public business.
It is only the business of the board of directors and stockholders.

If a CEO makes too much, then most of the public would be unaware. But the few who would be aware would be financial institutions who own stock in the company, or are considering buying stock in the company. For them , the value of the company's stock would immediately be lowered, even if most of the public is ignorant of this issue.

 

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