A recent Associated Press news story highlighted a fact that we all know – CEO pay has been going up again ever since a brief two year decline following the initial 2007 economic meltdown, and is now at its highest level ever. In 2012, according to data from Equilar, an executive pay research firm, the “average” CEO made $9.7 million, up 6.5% in 2012 from 2011. By comparison, the pay for all U.S. workers rose an average of 1.3% per year over the last three years.
Even more interesting is the fact that the two highest paid CEOs were from the entertainment and media industry, with the highest compensated CEO raking in just over $60 million [not including deferred stock compensation]. In fact, five out of the top ten were in entertainment and media. Another interesting fact is that the area with the highest average CEO pay is health care, while the lowest is that of public utility CEOs, not that they’re exactly impoverished with an average pay packet of $7.5 million.
There are a number of conclusions one might draw from this, but the one that stands out, at least to me, is that the highest paid executives come from the field that provides the least tangible value to its consumers. We need food, water, shelter, power, heat, and medical care. We don’t physically need packaged entertainment. While everyone complains about the costs of health care – and in most cases those costs are far too high – especially when one considers the pricing model of the pharmaceutical industry, where U.S. consumers foot the bill, and the rest of the world gets lower-cost prescription drugs – health care does provide a tangible benefit and has improved our lives. I’m not sure we can say that about the U.S. entertainment industry.
But entertainment – and today’s media is in fact entertainment, including almost all so-called news – obviously fills a psychological need – and one for which people are willing to pay – and one that is extraordinarily profitable – just like the illegal drug industry. Come to think of it, there’s a certain similarity. Both have products that make their consumers feel good, and both have negative long-term effects… and the content of both is essentially unregulated… and both are highly profitable for those at the top.
And like it or not, how we as a culture spend our money and reward those who provide goods and services says more about us than we’d like to admit.