Saturday, January 22, 2011

Bonus Time

New York Times published an article yesterday Pay Doubles for Bosses at Viacom By Graham Bowley:

Viacom awarded its chief executive, Philippe P. Dauman, total compensation for 2010 valued at about $84.5 million, more than double the 2009 figure, including salary, bonus and stock options, the company disclosed on Friday.

It awarded its chief operating officer, Thomas E. Dooley, total compensation valued at about $64.7 million, also more than double the 2009 compensation. Viacom disclosed the compensation in documents filed with the Securities and Exchange Commission after the market closed on Friday.

The company said, however, that the compensation was inflated by one-time stock awards linked to long-term contracts the executives signed last year. These contracts, for six and a half years, were unusually long for the industry, a spokesman, Carl Folta, said, and reflected Viacom’s recent better performance.

Without those one-time awards, Mr. Folta said, Mr. Dauman’s compensation was valued at about $30 million, including both cash and stock, and Mr. Dooley’s at about $23 million, both below their 2009 compensation.

Yes, we got it.  The compensation was reward for multiple years' efforts.  Even so, that $84,500,000 total income in one year to one person is simply obscene.

Let's look at what $84,500,000 means. 

According to U.S. Census Bureau's data, the median household income in 2008 is $52,029 in the USA and $55,980 in New York State, where Viacom's headquarters reside.  That means that Mr. Dauman's income for 2010 equals 1,624 average USA families' income (in 2008) or 1,509 average New York families' income.

Let us also look at the U.S. Department of Health & Human Services' the 2011 HHS Poverty Guidelines:

2011 HHS Poverty Guidelines
in Family
48 Contiguous
States and D.C.
Alaska Hawaii
1 $10,890 $13,600 $12,540
2  14,710  18,380  16,930
3  18,530  23,160  21,320
4  22,350  27,940  25,710
5  26,170  32,720  30,100
6  29,990  37,500  34,490
7  33,810  42,280  38,880
8  37,630  47,060  43,270
For each additional
person, add
   3,820    4,780    4,390

Therefore, it means that Mr. Dauman's income for 2010, equals the income of 7,759 persons who lives by themselves and have the income at the level of poverty line in the 48 contiguous states and D.C., including New York where Viocam's headquarters reside, or 3,781 families of four with income level at the poverty line in those said regions.

Again, U.S. Census Bureau has such data: in 2009, media sales price of new homes sold in United States 2009 was $216,700, and the average sales price was $270,900.  From that, we can calculate that Mr. Dauman's income for year 2010 could enable him to purchase 312 homes at the average sale price in 2009.

For year 2009, the average price of a new car is $28,715, according to U.S. Census Bureau who cited data from National Automobile Dealers Association.  We can gather that Mr. Dauman's 2010 income would have enabled him to purchase 2,943 new cars at the average price.

Don't you think something wrong with this picture?

Alas, the bonuses don't belong to the commercial enterprises alone.  Yesterday, San Francisco Chronicle reported that UC regents hand out raises after word of cuts.
Finances are so dire at the University of California that it might have to turn away qualified students, but UC has still found a way to reward hundreds of employees with more than $4 million in incentive pay and raises.

At the regents meeting Thursday in San Diego, UC officials reported giving rewards of $150 to $41,205 to nearly 1,500 UCSF employees who met performance targets, raising the pay of some campus executives to above market rate, and providing 10 percent raises of about $20,000 a year to three executives at their Oakland headquarters.

The executives, who have various financial responsibilities for the UC system, will earn between $216,370 and $247,500 in base pay.

"Whether a budget crisis or not, the university still has to be able to pay competitive salaries and incentives consistent with industry standards," said Steve Montiel, a spokesman for the university. "The university has no problem paying incentives to be competitive."

One of them, Grace Crickette, UC's chief risk officer, "has saved the university over $100 million by driving down the cost of workers' compensation, negotiating much more advantageous terms with our insurance company," Taylor said. The raises "are a small price to pay for people working at the highest level."


At UC Berkeley, for example, the new vice chancellor for administration and finance will earn a base salary of $375,000 - 9 percent higher than the salary midpoint of $344,000 earned by colleagues at other universities, UC officials reported.

At UCLA, the chief financial officer of the hospital system will receive a 10.5 percent raise, bringing his salary to $420,000 from $380,000 as a hedge against the possibility that he would go somewhere else. The campus called it a "pre-emptive retention salary adjustment."

I got it - Mr. Crickette earned his large bonus by making low level employees make less.

And what does $420,000 mean?  That was the equivalent of 14.6 new cars at the said average price in 2009.  How many new cars can you buy with your annual salary?

What is University of California now?  Still a public education and research institution?

I am reading Dostoevsky's Demons, which describes the political chaos seen in 19th-Century Russia.  However, when I read the mentioning of Internationale, I couldn't help but shudder - are we heading that mighty and destructive collision headlong?

Hungry Kids - Käthe Kollwitz
Hungry Kids - Käthe Kollwitz

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