Corporate America sporting about pay

By SILVIO LACCETTI and SCOTT MOLSKI
MCCLATCHY-TRIBUNE
Excessive CEO compensation packages have sparked a national outcry from the public, the president and even corporate boards of directors. Did you ever wonder how these excessive packages arrived at their current bloated levels?
You might find there is a lagging sports superstar syndrome at work in corporate America.
To set the theme, our research goes back to the time when baseball was the most popular sport in the country. Babe Ruth, one of the game's greatest, was paid a salary of 50,000 in 1922, excellent pay at the time. In then took until 1947 to reach the next plateau: Hank Greenberg and his 100,000 salary, again excellent pay and 36 times what the average American was making then.
In an additional 25 years, Hank Aaron's 200,000 salary was baseball's highest. While still great pay at the time, baseball's top superstar now made only 28 times what the average American earned.
After this, the fun began. Out with baseball's reserve clause, in with free-agency. Thanks to Curt Flood's stand in 1969 and The Seitz Decision in 1975, baseball players were no longer stuck with one team. The bidding wars began. In 1975, Catfish Hunter was paid 740,000. In 1979 Nolan Ryan became the first 1 million player. In 1982, George Foster became the first to receive 2 million. The trend exponentially increased to the present with the New York Yankees' A-Rod making an average of more than 20 million per season.
Average American salary
The disparity between these salaries and the average American salary also grew exponentially: It was 85 times greater in 1975, 140 times in 1982, and a whopping 703 times today.
All sports with lucrative TV deals show a similar trend in salaries.
Now corporate executives run the companies that sponsor the TV programs and underwrite sports star salaries. Moreover, CEOs do more than work magic with balls. How long before they would pick up on the trend of super-compensation? About 10 years.
Beginning in the '80s, Corporate America mirrored sports as we saw a trend of corporate downsizing and leveraged buyouts. These led to a type of "free agency" of American managers as long-standing employer-employee loyalty bonds degraded. Today, executives are changing allegiances more than ever. The average CEO tenure is rapidly declining and a record-high 1,478 CEOs left their positions in 2006, a recent Watson Wyatt study revealed. A 2007 report by The Economist shows the salary curve rising exponentially in the '80s.
Regarding the high compensation of today's superstar CEOs, a 2005 report by Forbes showed Richard Fairbank with Capital One Financial as the highest paid CEO with a total annual pay of 249 million. We know what he's got in his wallet! At the world's most profitable company, Exxon Mobil, 2005 CEO Lee Raymond made a reported 48 million in 2005. The one figure is more than 6,700 times the average American salary, the other about 1,300 times greater.
But if sports sets the tone for top executive pay, it also may hold a solution to runaway compensation.
Today, football has replaced baseball as America's sport, with the recent Super Bowl as the most watched television program in America. The National Football League is arguably the best run sports organization in the world. Since 1994, the NFL has operated with a hard salary cap. It limits each team to a maximum of 102 million in salaries.
This cap has helped slow the increase in salaries on individual teams and in the league as a whole. The NFL can't afford an unlimited number of highly paid superstars. Along with the cap came a floor -- a minimum that must be spent by each team -- again designed to keep the league strong. Every contract is reviewed by the NFL.
Public revolt
Given the decade lag between corporate America and professional sports we should expect a public revolt over CEO pay ... oh, right about now. And that's exactly what we have. Everyone is complaining: shareholders, boards, unions, even the president. But can we now look to sports for a solution? Would a salary cap hold up in capitalist, antitrust America?
The answer is yes. Through stricter oversight and self-regulation. First, shareholders must gain new powers to vote on executive compensation packages. Second, a more community-minded leadership model must evolve in corporate America. CEO's must realize that they are still part of the same universe, still playing in the same ball game, as all other members of the company.
Silvio Laccetti is a professor of Social Sciences at Stevens Institute of Technology in Hoboken, N.J. Scott Molski is vice president of sales with Dillistone Systems. Distributed by McClatchy-Tribune Information Services.