Since this issue of Insurance Journal puts the spotlight on agency salaries, it’s only fair that the compensation of corporate CEOs come in for some scrutiny as well.
No, we’re not going on a paycheck hunt, even though the information on who’s worth what among insurer CEOs is readily available from the Securities and Exchange Commission (http://www.sec.gov/answers/execomp.htm).
If we used the SEC executive disclosure finder, we could tell you that only $1 million of Travelers Insurance CEO Jay S. Fishman’s total $16 million package is salary. We could also point out that J. Patrick Gallagher, Jr. has a deal worth $3.3 million, including a $925,00 salary, for showing up every day as chairman, president and CEO of Arthur J. Gallagher & Co.
Also, don’t tell anyone but Progressive CEO and President Glenn Renwick makes $750,000 in salary while his total compensation is $5.4 million. Or that Martin J. Sullivan, CEO of American International Group, also reports a salary of $1 million out of total compensation that tops $21 million. Oh, and Chubb Corp.’s John D. Finnegan takes in $16.7 million total, with $1.275 of that in salary.
But we’re not going to look at those numbers because if we did, we might feel compelled to advise one of the world’s richest and probably smartest men, Berkshire Hathaway CEO Warren Buffett, to look for a new job. He only pays himself $100,000 salary and a total package worth $214,000. Not sure if Buffet knows this but his CFO gets more than six times what he does in salary.
We’re not even going to mention the Reuters report that Marsh & McLennan Cos. Inc. will pay Michael Cherkasky $7.15 million as part of a severance package reached after he was forced out earlier this year.
Instead of succumbing to the paycheck envy that haunts many journalists, we’re going to go in a completely different direction with this topic. We are going to simply cite The Conference Board report that found that the highest median total compensation ($3.9 million) for CEOs is recorded in utilities, food and tobacco, and — you guessed it — the insurance industry, with construction a close fourth.
By the way, total compensation in the executive world includes annualized salary, bonus, non-equity incentive compensation, the reported grant date present value of options, the value of stock awards, the change in pension value, and all other compensation.
The median CEO compensation in the insurance industry ranks third out of 22 industries, while the median CEO cash compensation (sum of annualized salary, bonus, and non-equity incentive compensation) is highest in the insurance industry ($1.6 million).
The Conference Board says that CEOs of the largest companies actually have a substantial amount of “skin in the game,” whereas CEOs of smaller companies tend to be rewarded more with salary than with stock or other forms of compensation.
Of course, not all employers, and indeed very few insurance agencies or brokerages, are in a position to offer a lot of “skin in the game” beyond salary to CEOs, producers or other employees.
But the CEO world teaches us that linking employees’ compensation to the performance of the company as a whole in whatever ways a company can is the way to go. Clearly, salary should not be the sole measure of how much “skin in the game” someone has.
Isn’t that right, Mr. Buffett?
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