Peer Benchmarketing

Peter Whoriskey, writing for the Washington Post wrote a great article on peer benchmarketing. It was a new term for me (as well as for my spellchecker) but it sure helps explains a lot. The example he uses at the beginning of his article talks about the Amgen biotech company giving a raise to its chief executive Kevin W. Sharer. Sharer was earning $15 million a year with a couple of corporate jets at his disposal, and they voted to increase his compensation to $21 million a year, a 37% increase.

Under his leadership the Amgen firm had lost 7% on their investment over the last 5 years and trimmed their workforce from 20,100 to 17,400.  So why does this bonehead get a raise? Here comes the benchmarking part, it brings his pay equal to or above the median for executives for other companies their size. Apparently this is the norm in big business, but it has been well hidden from the public.

Performance does not seem to come into play in today’s executives pay, they just want to keep up with the Jones of the other companies.

I don’t know about you, but it sure explains a lot to me in terms of why we have such inequity of income in this country.

Whoriskey points out that since the 1970’s median pay for executives at the nations largest companies has more the quadrupled even after you adjust for inflations. On the other hand, pay for non-supervisory workers has dropped 10%.

This is absolutely disgusting but important information. I suggest you read the entire article.

http://www.washingtonpost.com/business/economy/cozy-relationships-and-peer-benchmarking-send-ceos-pay-soaring/2011/09/22/gIQAgq8NJL_story_1.html