Lake Woebegon is the place where, in the words of Garrison Keillor, "all the women are strong, all the men are good looking, and all the children are above average." The belief that everybody is above average is permeating our culture. We see it in a number of American activities - rating securities, raising kids, the military, etc.
And, of course, it has been a factor in the pay of Fortune 500 CEOs; they get paid in comparison with their peers. It so happens that just about none of these CEOs is paid below the median compensation of their peers; most are paid above this median. This compensation is paid without regard to the results of the company they head.
Take Amgen as an example. The CEO got a got a raise of 37%, from $15,000,000 to $21,000,000 because he was deemed to fall in the 75th percentile of his peers. The shareholders have not done as well; the stock was down 3% in 2010 and 7% since 2006. And 3,000+ employees have lost their jobs. That's because the shareholders and employees live in America, not Lake Woebegon.
Since the 1970s, median pay for executives at the nation’s largest companies has more than quadrupled, even after adjusting for inflation, according to researchers. Over the same period, pay for a typical non-supervisory worker has dropped more than 10 percent, according to Bureau of Labor statistics.
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