Fortune 500 CEOs: The professional athletes of corporate America

Fortune 500 CEOs: The professional athletes of corporate America
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With proxy season underway, shareholders will have an opportunity to vote on measures that affect their return on investment based on the performance of the company.

Undoubtedly, some proposals will aim to curve the pay, bonuses and stock options of c-suite executives and the board members of the companies they serve. This has been a rallying cry for Democrats who believe CEOs are paid too much and now they believe they have the evidence to prove it.

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Rep. Keith EllisonKeith Maurice EllisonEllison grilled about abuse allegations at Minnesota AG debate Sexual assault is not a game — stop using women to score political points Ellison accuser: Dems 'smeared, threatened, isolated' me MORE (D-Minn.) released a study that found US companies and their CEOs earn 336 times more than the median pay of their employees. The study collected information that public companies are compelled to submit to the Securities and Exchange Commission under Dodd-Frank.

 

What does CEO pay have to do with the financial crisis and future crisis? Absolutely nothing, but Democrats thought it best to have the SEC spend time and resources to issue a formal disclosure rule instead of targeting bad actors that seek to harm investors.

Of course, Democrats have seized on the study and used it to signal a “dramatic indicator of our country’s extreme economic divide.” Sen. Elizabeth WarrenElizabeth Ann WarrenDemocrats opposed to Pelosi lack challenger to topple her More Massachusetts Voters Prefer Deval Patrick for President than Elizabeth Warren Trump's trade war — firing all cannons or closing the portholes? MORE (D-Mass.) called the report a powerful tool for shareholders and the public to demand fair pay.

In an interview with Bloomberg’s David Westin, Westin pointed out that CEO pay is not a new or alarming issue for shareholders, and he followed up by asking Ellison if he would be in favor of government intervention to regulate CEOs pay, to which Ellison said, “I think it is a very good idea.”

Westin’s question and Ellison’s response demonstrates the fundamental difference between what Democrats deem is “fair” versus how shareholders value in a company’s performance. The point that Democrats seem to always miss is that these CEOs are the best at what they do, much like professional athletes are the best at the sport they play. 

In both cases, athletes and CEOs spend a lifetime training and studying to get to the top of their professional position, whether it be hours spent reviewing film and practicing double plays, or graduating from the University of Pennsylvania’s Wharton school of Business. 

Democrats are never critical of what athletes earn as a salary, even though the salary for quarterback Matt Ryan of the Atlanta Falcons is substantially similar to that of Jamie Dimon, JPMorgan’s Chairman and CEO, including bonuses and stock performance. Unlike Democrats, it is easy to see that both men are elite at what they do, spend days away from their families for work, are educated on the performance of their profession and ultimately bare the responsibly for what happens either on the field or in the marketplace.

For shareholders of JPMorgan, the case could be made that the performance of the company and stock is tied to Jamie Dimon as Chairman and CEO, benefiting investors small and large. In fact, as recently as last month, shareholders of JPMorgan supported all of the banks management’s proposals, including executive compensation.

In typical Washington-knows-best fashion, Dodd-Frank forced companies to hold an advisory vote on executive compensation. As such, this has expanded the role proxy advisory firms play in providing shareholders third party suggestions on how shareholders should vote on such business decisions like say-on-pay, regardless of how misleading the information may be.

The anti-corporation agenda Democrats have pushed may actually have a negative impact on shareholders return on investment, to whom the CEOs and boards of directors have a fiduciary responsibility to protect. In a 2014 Harvard Law report, the authors explain how the reliance on proxy firm’s recommendations for executive compensation can influence how corporate boards act and decrease shareholder value.

CEOs and boards of directors should be applauded for their investment in jobs that have allowed people to transition from poverty to prosperity, the creation of products that we use throughout our daily lives and the largest economy in the world, not blamed as the reason for inequality.

James Setterlund is a federal affairs manager at Americans for Tax Reform, a nonprofit group dedicated to lower taxes and limited government.