Are managers overpaid? It depends on whom you ask

By Robert Bellinger

Are corporate managers in the technology world overpaid? We asked this question of our 503 engineers and managers because CEO compensation has been soaring. IBM's Louis V. Gerstner, for example, got $13.7 million in 1998, not counting stock options; Hewlett-Packard's Lewis E. Platt collected $6.5 million last year; and Motorola's Christopher Galvin received a bargain-rate $1.8 million, not counting ownership. The calculator at the AFL-CIO's Executive Pay Watch Web site figured out that 126 engineers earning our mean salary of $75,500 could be supported on a CEO's wage of $4.5 million and $5 million in untapped options-a compensation package by no means unusual at the Fortune 500 level.

"The ratio between the top-paying job and bottom-paying job is excessive in the U.S.A.," a principal engineer said in response to our survey.

The AFL-CIO, while not an objective source, figures that Fortune 500 CEOs earn about 419 times the wage of an average factory worker and that American CEOs collect eight times more than their European or Japanese counterparts. Even pro-business publications such as Business Week have noted that performance often has little to do with a CEO's pay: Witness the golden parachutes of CEOs who have bailed out of failing companies.

But EE Times readers aren't prepared to demand pay cuts for their CEOs. And more than 56 percent say corporate managers are not overpaid. "Not if they're good. It requires a rare mix of people skills and technical skills to manage a high-tech company," a group leader said. "On a dollar-per-hour basis, we are underpaid," maintains a department head.

Of course, those managers are closer to the corporate world than staffers, so it's not illogical that a mere 23 percent of managers believe their corporate superiors are overpaid. Half of staff-level engineers, on the other hand, peer up through the corporate rungs and see a bunch of fat cats.

That was particularly true during the first half of the 1990s. CEOs were laying off thousands of people in technology companies, and they came under fire for being "rewarded" with bonuses. "They lay off people and then get paid for their own mistakes," one reader points out. Added another, a Texas design engineer: "It's ridiculous how our benefits and salaries are squeezed in order to allow obscene management perks" such as corporate cars, country club memberships, use of corporate planes. "They are making huge windfall profits due to stock options in a historic bull market," a manufacturing manager points out. "Most will lose most of it when the market turns."

But CEOs have a defender in at least one principal engineer: "They train and work as hard as lawyers or physicians, yet they get half the pay for very important work."

If a corporate manager maps out a market strategy that pays off, then his or her work has created jobs and entire industries. But the life span of a CEO can be short and unforgiving. This year, Eckhard Pfeiffer, who led Compaq Computer Corp. to the top of the PC world in the '90s, left after a couple of laggard quarters and a perception that Compaq failed to capitalize on Internet sales. "There are no second chances," one reader said. The top corporate positions turn over rapidly.

At least one reader differentiates between corporate and engineering management. "I think the VP of engineering and technology is paid OK, but the CEO is typically overpaid," he said. "Our typical VP of engineering earns about $105,000, not excessive in an industry where some hotshot engineers are earning that much."

There is less respect for a manager who lacks technology knowledge, a feeling not unexpected in a survey of engineers. A California design engineer notes, "Some people doing pure management without involving technology cannot keep up with the evolution of the industry and seem to be overpaid for the job they are doing."

So, is Bill Gates overpaid? He cashed out billions this year, but as defenders point out, he created those billions in growing the value of Microsoft.

Return to 1999 Salary & Opinion Survey