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Fortune (as published by, November 18, 2009 article



Fat cat pay - Then and now

When it comes to public outrage over executive compensation, history does not repeat itself, but it just might rhyme.

By Carol J. Loomis, senior editor at large

Last Updated: November 18, 2009: 11:13 AM ET



Depression era

In the days before stock options, pay consisted of salaries and bonuses alone.

Eugene Grace
President, Bethlehem Steel
1929: $1.62 million
$20.5 million in 2009 dollars

George Washington Hill
President, American Tobacco
1930: $1.01 million
$13.06 million in 2009 dollars

Alfred P. Sloan
President, GM
1936: $561,000
$8.7 million in 2009 dollars


Last year

IThese 2008 figures, from a Wall Street Journal survey, include salaries; incentives; and option and stock grants.

Vikram Pandit
CEO, Citigroup
$38.2 million in 2008

Jamie Dimon
CEO, J.P. Morgan Chase
$20.9 million in 2008

Kenneth Lewis
CEO, Bank of America
$7 million in 2008

(Fortune Magazine) -- It's unprecedented for the nation to be outraged about corporate pay, right? Not exactly: In the 1930s, as the Depression gripped the nation, furor about compensation rose to fever pitch, and Washington applied shears to salaries.

In an article soon to be published in the University of Richmond Law Review, Harwell Wells, an assistant professor of law at Temple University, says the decade exposed "deep tensions" about the issue.

A big difference between then and now is that the 1930s fury was directed not at financial institutions but rather at "excessive" payers among industrial and consumer companies -- like Bethlehem Steel, American Tobacco, and GM.

Similarly, when the government moved in 1933 to both provide financial aid to certain key industries and put a ceiling on salaries within them, it was railroad, shipping, and air transport companies (fledglings then) that got both the help and the hurt.

In 1936, Fortune weighed in on the red-hot pay issue by asking in a national survey, Do you think that in general the officials of large corporations are paid too much or too little for the work they do? The verdict: 55% of the respondents said the officials were paid "too much."

The public's war cry in the 1930s, says Wells, was "No man can be worth $1 million a year."

That campaign -- along with a sick economy and a few "corporate waste" lawsuits -- seems to have worked.

In 1929, Eugene Grace, the autocratic president of Bethlehem Steel, ruled the nation in pay, earning an amazing $1.62 million, which in 2009 dollars equals $20.5 million.

By 1936, Grace was just an also-ran, pulling in $180,000 ($2.8 million in 2009 dollars). The top earner that year was GM's Alfred P. Sloan, with $561,000 ($8.7 million in 2009 dollars).

After the 1930s, executive compensation largely dropped out of the news for decades. By the late 1970s, however, the $1 million threshold was again crossed (by Henry Ford II, among others).

Since then, executive compensation has never ceased to rise or attract anger. The latest volley of the rage is aimed at the financial companies that received government help beginning in 2008.

As for that year, the Wall Street Journal gave its top spot in pay not to a financial executive but to Sanjay Jha, the new co-CEO of Motorola, who got $104 million in compensation (overwhelmingly from stock options and restricted stock). Hmm. How do you like the ring of "No man can be worth $100 million a year"? To top of page

First Published: November 18, 2009: 4:41 AM ET

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