February 25, 2008

Obama’s Very Shaky 10-Minute CEO Earnings Claim

Filed under: Business Moves,Economy,Taxes & Government — Tom @ 9:27 am

It’s an extraordinarily clever claim. It gets your attention. It’s misleading.

And of course, Old Media isn’t questioning it.

I am referring to the following statement made by the candidate I refer to as BOOHOO (Barack O-bomba Overseas Hussein “Obambi” Obama) in radio ads currently running in Ohio and Texas:

Some CEOs make more in 10 minutes than some American workers make in a year.

In the full context of the ad, I believe that what Obama wants listeners to take away is that “Quite a few CEOs typically, year after year, make more in 10 minutes than some American workers make in a year.”

But let’s limit things to the literal wording. Start with a full-time minimum-wage worker who earns (rounded) $12,000 annually ($5.85 per hour times 2,080 hours is a bit more than that). How much would a CEO have to make in a year to be earning over $12,000 every 10 minutes?

The answer: At least $187 million — and, uh, “change”:

Obama10thouPerMin0208

So how many CEOs made that much in 2006? The answer in 2006, according to Forbes, was three:

Forbes2006CEOcomp

How about 2005? Try one (per Forbes), maybe two (woopidoo.com has an additional name on its list):

Forbes2005CEOcomp

One-year wonders are fine, but how many CEOs averaged $187.2 million or more in earnings over 5 years? As you can see above, the answer is “none in either year.”

It’s also worth noting that three of the four CEOs above (Jobs, Semel, and Diller) are in charge of high-tech businesses that are not exactly known for having high concentrations of minimum-wage workers.

If Obama’s claim stands, it does so using the narrowest of definitions, and even then it only survives by the very thinnest of margins. An ordinary listener would clearly believe that Obama’s ad refers to more than four people (or five, if you include the additional CEO listed at woopidoo.com) in a two-year period.

Obama’s single-out of CEOs is also conveniently selective. If you wonder why he did not include certain entertainers in the list of those making more in 10 minutes than some workers, wonder no more:

Forbes2006Celeb100comp

Lee Cary at American Thinker adds this:

Sure, the gross disparity between CEO and average worker pay is a valid issue. And, for a relatively few CEOs and other mega-earners like Oprah Winfrey, top professional athletes, and major Hollywood movie stars, Obama’s claim may be mathematically accurate. But as a blanket assertion, it’s a level of derogatory rhetoric that only works when adulation kills critical thinking.

It’s also appears to be a level of derogatory rhetoric Old Media doesn’t mind letting go by unchallenged.

Cross-posted at NewsBusters.org.

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UPDATE: Here are a few other possible wiggles in Obama’s statement:

  • “Some American workers” don’t work full-time.
  • “Some CEOs” could be seen to “make” more in certain 10-minute blocks of time (such as board meetings when bonuses are declared).
  • CEO income outside of work (directors’ fees from other companies, etc.) could push the amounts noted above higher than indicated.
  • Oprah is the CEO of her own corporation(s), so he really was picking on her (uh-huh).
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2 Comments

  1. Read the fine print at Forbes:

    Compensation rank is based on total compensation for latest fiscal year. Total compensation for each chief executive includes the following: salary and bonuses; other compensation, such as vested restricted stock grants, LTIP payouts and perks; and stock gains, the value realized by exercising stock options. Efficiency rank is based on our chief executive’s performance/pay score. Ranks are given only to chief executives who have a six-year tenure and six-year compensation history. The most efficient rank is 1 and least efficient is 189. Compensation rank is based on total compensation for latest fiscal year.

    “Total Compensation” is much more than just their payacheck, so the ad is even more mis-leading when you realize he’s comparing apples to oranges.

    Comment by Bob Zidlicky — February 25, 2008 @ 10:37 am

  2. #1 (kidding) — It all depends on what you mean by “make.”

    Seriously, your point is excellent, as an ordinary worker would have to include the appreciation in his 401(k) and other holdings to make the comparison closer to apples-apples.

    Comment by TBlumer — February 25, 2008 @ 11:02 am

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