Executive Pay and Jobs

TJ Rogers, Founder and CEO of Cypress Semiconductor, wrote in part about executive pay and income taxes in his experience in a Wall Street Journal op-ed a while ago.

A couple of years ago, I decided to invest in my hometown of Oshkosh, Wis., by building a $1.2 million lakefront restaurant.  That restaurant now permanently employs 65 people at an investment of $18,000 per job, a figure consistent with US small businesses.  If progressive taxation in the name of “fairness” had taken my “extra” $1.2 million and spent it on a government stimulus program, would 65 jobs have been created?

According to recent Congressional Budget Office statistics on the Obama administration’s 2009 stimulus program, each job created has cost between $500,000 and $4 million.  Thus, my $1.2 million, taxed and respent on a government project of uncertain duration, would have created about one job, possibly two, and not the 65 sustainable jobs that my private investment did.

On the other end of the capital-intensity scale, Cypress Semiconductor required huge investments to create jobs in its chip-manufacturing plants.  Between 1983 and 2003, those investments totaled $797 million and led to the creation of 4,033 jobs at an investment of $198,000 per job created.  Thus, my own experience on the cost of job creation ranges from $18,000 to $198,000 per job, compared with $500,000 to $4 million per job created by the Obama stimulus program.

That got me thinking about CEO compensation and the number of employees working for the CEO’s company more generally—how much was the CEO paid per employee on the payroll for stable companies that were not (yet, or anymore) actively investing in plant expansion?

Here, for some not very randomly selected large corporations, are CEO compensation, total employees in the company, and the CEO’s compensation per employee.  The data, for the year 2011 (except as noted), are from CNN Money.


CEO Total Compensation

Total Employees

CEO $ Per Employee


$21.4 million



Wal Mart Stores

$17.7 million



Exxon Mobil Corp

$29 million




AT&T Inc

$27.3 million



UnitedHealth Group Inc

$10.8 million




Here are the same data for small businesses (contra Rogers’ example, fewer than 25 employees), averaged across selected industries.  The CEO $ per employee is figured, naively, on 15 employees, since most small businesses won’t have 24 employees, and 15 made the arithmetic easier than 12 (the mid-point of the employee range).


CEO Total Compensation

CEO $ Per Employee

Business Services









Retail & Wholesale







These guys, despite being an order of magnitude, or two, more expensive than a large corporation CEO on a per job basis, still are enormously more efficient job creators than the Federal government.

The real takeaway, though, from these two tables has to do with the compensation “disparity” between CEOs and line workers, especially concerning those highly paid large corporation MFWICs.  Given the hiring rates they’re generating, they seem to be worth their pay.  (And none of this disputes the thesis that it’s small businesses that are the engines of economic growth and employment hiring.  It’s a whole lot easier to ramp up a small business than it is a large one.)

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