CEOs Are Ridiculed for Huge Salaries: Why Aren't Athletes and Entertainers? (page 1 of 4)

Grasso, the former chairman of the New York Stock Exchange, is only the latest among numerous executives pilloried for their excessive compensation. Certainly many of the CEOs under fire - Kenneth Lay of Enron, Dennis Kozlowski of Tyco and Bernie Ebbers of WorldCom are just a few examples - led their companies in ways that were allegedly inimical to the interests of a wide spectrum of constituents, including shareholders, employees and customers. It is hardly surprising that they are in the hot seat.

But Grasso, who only recently came under investigation for possible influence trading during his NYSE tenure, has been derided mainly for persuading his board of directors that he was worth all the money - $187.5 million in deferred compensation - they heaped on him. Certainly Jack Welch, the former chairman of General Electric Co., created an enormous amount of shareholder value during this tenure, but even he is being criticized these days for excessive greed.

Actors, athletes and executives are among the most populous inhabitants of the rarified atmosphere of multimillion dollar incomes. Why is it, then, that corporate executives are coming under fire for excessive pay when athletes like Michael Jordan and entertainers like Oprah Winfrey seem to stir no such feelings of resentment? Indeed, Winfrey is widely beloved by millions of people, many of whom are women with lower-than-average incomes, and Jordan is respected and admired by millions more, many of whom are men with lower-than-average incomes.

'I Could Do That'
Part of the answer, suggest some experts, is the nature of their different jobs. Athletes and entertainers produce something that is clearly evident to their fans. Stars, for example, have a talent and presence that millions flock to the theaters to see and athletes turn in amazing performances on the basketball court or the football field that fans know they couldn't in their wildest dreams accomplish. CEOs, in contrast, often have a hard time demonstrating exactly what they bring to the party.

"People get a direct benefit from what entertainers provide," says Peter Fader, a professor of marketing at Wharton. "Life is better because of entertainers, and there's a genuine admiration for the special skills that entertainers have. People look at them and say, 'Gee, I wish I were like that person, I wish I had their talent.' But when people look at managers, they tend to say, 'I could do that.'"

Fader adds that entertainers and athletes also exude a bigger-than-life aura that leads fans to forgive - even applaud - what among regular people, including executives, would seem pretentious or even outrageous. "It's interesting to notice how regular people put things in different contexts. An actress is expected to emerge from a limousine, but when an executive gets out of one, it's seen as something excessive."

Wharton accounting professor David F. Larcker, an expert in executive compensation, says it is common for people trying to explain the high pay of CEOs to benchmark executive salaries to the compensation paid actors and athletes. But he argues that the markets for actors, athletes and executives are different from one another and don't necessarily work efficiently enough to make comparisons worthwhile or even to assure that within any one of those groups the correct pay levels are being set.

Of the three, Larcker says entertainment appears to be the most transparent and efficient.