IBM CEO Gets Big Raise for Bad Performance

Virginia RomettyDid you get a 6.7% salary increase this year? Of course you didn’t! You’re a Frankly Curious reader. You work for a living. A 6.7% raise is more than the cost of living. And if there is one iron rule in the Land of Opportunity™, it is that the American worker should never see any gain from her increased productivity. She should feel grateful that she even has a job! Of course, the situation is quite different for the people at the top of our economy. In a bizarre kind of logic that I’ve never understood, if someone is rich, she must constantly see improvements in her salary. Otherwise, she might have her feeling hurt and not be a “job creator.” Or something.

Consider IBM Chairman and CEO Virginia Rometty. She got a 6.7% raise this year. But it hardly matters. Given all the other salary increases, I doubt she will notice it. As it is, it is only an extra $100,000 per year. That’s right: her base salary raise is not even quite double the median income of two American households. But I suppose that Rometty will struggle through this clear insult because of other compensation that she’s getting. For example, she’s getting a $3.6 million bonus for last year. She’s also getting a $13.3 million stock incentive. But she’s going to have to wait a whole three years to cash that out. I just hope her children can wait that long for new shoes.

According to the power elite in this country, such largess is the result of just how productive people like Rometty are. But Michael Hiltzik has provided the low down on this one, IBM Redefines Failure as “success,” Gives Underachieving CEO Enormous Raise. Rometty’s performance has been impressive in a certain way:

Here’s the record for 2014 the board thought was good enough to warrant a raise for Rometty: IBM’s revenue declined by nearly 6%, and net income by 27%. IBM shares began 2014 at a dividend-adjusted $183.12 and ended the year at 160.44%, a decline of 12.4%. During that period, the Standard & Poor’s 500 index rose 12.4%. (As we write on Monday, IBM has fallen further to $152.12.) IBM has been the worst performing stock on the Dow Jones Industrial Average for two years running.

My take on the whole thing is that her performance doesn’t matter. When CEOs get bonuses because their companies were more profitable, it is rarely because of the CEO. It is much more likely to be the vagaries of the economy. Yet the CEOs and all the other high level executives get huge bonuses because of this. The workers, of course, do not. And that is the critical fact in all of this. Among the Skull and Bones crowd, there were girls you slept with, and girls you married. When those boys grew up, they understood just as well that there are people who get bonuses, and people who don’t. And we are the people who don’t.

Hiltzik pointed out that the four IBM board members who approved Rometty’s raise are all former CEOs. So the move isn’t surprising, “Corporate CEOs are, as a species, known for a sense of entitlement that could make $17 million in raises, bonuses, and ‘incentive compensation’ seem like punishment.” That sentence is like a soothing bath: just to hear the word “entitlement” used to describe the rich! It is entirely correct, but also rarely unheard. According to most in the mainstream media, “entitlement” is something that poor people feel.

This is all part of what I wrote earlier, We Need to Embrace Class. The issue is not that the rich are different from the rest of us. The issue is that everyone thinks that they are different. And that’s why an unsuccessful CEO can be given $17 million in extra compensation for manning her company on its long trip into irrelevance. Because the rich can never be allowed to fail. Because the rich must be constantly pandered to. Because the rich are rich!

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About Frank Moraes

Frank Moraes is a freelance writer and editor online and in print. He is educated as a scientist with a PhD in Atmospheric Physics. He has worked in climate science, remote sensing, throughout the computer industry, and as a college physics instructor. Find out more at About Frank Moraes.

4 thoughts on “IBM CEO Gets Big Raise for Bad Performance

  1. It seems like the expression of skepticism as to the economic contribution of executives continues to be fringy in today’s politics. You’re a kook if you think that high salaries are no proof of extraordinary economic value. In contrast, every fisheries official obviously sits around all day to earn a fortune, and they are all incompetent. And these sentiments are not confined to elite apologists.

    We need a renewed left-wing culture in North America. One devoted to plain moral sense, not abstractions like ‘microaggression’. Let’s talk straight here. Rometty is part of a parasitic class, much more similar to Tony Soprano than to a hardworking convenience store owner. They are the unproductive.

    • My biggest interest in economics the last year has been how technology and infrastructure allow people to get a greater share of income. The easiest way to think about it is how an actor can make more money with film than she could on the stage. It makes no sense that actors today should make more money than they did 200 years ago. There are some economists who work on this stuff, but in general, we don’t discuss it. There is an assumption that however much money people make is “natural.” But no actor invented film. (Obviously, my concern is not actors; I’m more concerned about things like container ships.)

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