This is one of 1122 articles in my book Now and Then Again, The Way We Were and the Way We Are, second edition. The book is available from Amazon for $20.95 print and $9.95 Kindle and also as an ebook from Apple, Kobo, and Scribd for $9.95. It's fixed format so it's better with a tablet, laptop, or computer. There are more articles from the book on another blog here. And there is a book preview website.
More More Money Than You Could Ever Spend
Remember that greedy little fellow Richard Grasso? He’s the guy who was forced out as head of the New York Stock Exchange in 2003 after his buddies on the board gave him $140 million in deferred compensation on top of his $11 million a year regular paycheck. Not content, he sued to get another $48 million he was owed.
Just the interest on all that money would provide deluxe health insurance for 600 families. (5% interest, $1400 a month.)
His defenders say he earned it by doing great things for the NYSE. This is the usual argument for giving the CEO too much money.
But this does not address the point at issue. The point is not how great the accomplishment, but what great accomplishments are worth.
Here’s the answer: nothing anybody ever did is worth that much money.
Besides, what’s the difference if you get less more money than you could ever spend or more more money than you could ever spend? Do you think all the CEOs would quit to go flip burgers if all they could get was a measly million a year?
After all, they’re just salarymen. If they need that kind of money, let them go out and start their own businesses so they can keep it all. (Hint: it’s not so easy.)
Here’s a better incentive: succeed or be fired.
Less More Money than You Could Ever Spend
On the last day of January, 1905, James Hazen Hyde, 28, son and heir of the founder of the Equitable Life Assurance Society, gave one of the most sumptuous balls of the Gilded Age.
It was a costume ball with an 18th century theme held in the ballroom of society’s watering hole, Sherry’s Restaurant in New York. Six hundred costumed guests were entertained by the Metropolitan Opera Orchestra and a specially commissioned one act play performed by famous French actress Gabrielle Réjane. The guests feasted on three meals until 7 the next morning.
The ball was reported in all the papers. This gave James Alexander, Equitable’s president, the excuse he needed to try to gain control of the company from Hyde, who was vice-president but had inherited a controlling interest. He accused Hyde of spending $200,000, ($4.88 million in 2012 at 24.39X inflation) on the ball and charging it to the company. Alexander was joined by Robber Baron board members E.H. Harriman, Henry Clay Frick, and J.P. Morgan.
The charge was false — Hyde had paid for the ball himself and it had cost probably $50,000. But the press reported Alexander’s charge as fact and it caused a sensation and public outrage. The New York times ran 115 articles on the scandal in one year.
The New York State Legislature investigated the insurance industry, calling executives of New York Life, the Equitable, and Mutual Life before the Anderson committee. Their testimony revealed conflict of interest transactions, large payments to politicians and unconscionable salaries for themselves. It came to be known as the Wall Street Scandal of 1905.
Hyde was forced to resign and left for France. He served as an ambulance driver in World War I. He returned in 1941 and died in New York in 1959.
An article in the February 5, 1911 issue of the Literary Digest quotes the New York Evening Post noting “an epidemic of lowering of the big salaries of the industrial and financial world.” “Because of the public agitation respecting the high cost of insurance management in the United States and the unpleasant disclosures attending the Armstrong investigation in 1905.”
The new president of the Steel Trust [U.S. Steel] found his salary reduced to $50,000 ($1.3 million in 2015) from the $100,000 of his predecessor. Equitable’s president when he assumed office after Alexander resigned in 1905 asked that the $100,000 salary Alexander had been receiving be cut to $80,000.
The Post article goes on: “With the possible exceptions of one or two banks and trust companies, there is not a financial institution on Wall Street which reimburses its president at a higher salary than $50,000 a year.”
Today the Equitable is a subsidiary of AXA, a French insurance company and CEO compensation is not available. Compensation for New York Life and Mutual Life (now MONY) CEOs are also not available.
In 2014, U.S. Steel president Mario Longhi made $542,763 in 1911 dollars. Prudential CEO John Strangfeld earned $727,796, and MetLife’s Steven A. Kandarian took in $600,329.
JP Morgan Chase chief Jamie Dimon beat them all with $822,368.
Copyright © Joseph Mirsky 2020