The Compensation of a CEO

A CEO’s salary is determined by experience, education and the type of leadership he/she perceives to bring to a company. In addition, a Board of Directors can influence a CEO’s salary by setting quarterly performance goals for the company. If met, a CEO’s salary can significantly increase based on performance based bonuses and stock options.

Ruth Chris Fires CEO

In April Month’s Top News Story, I had mentioned about the surprise ousting of Ruth’s Chris CEO, Craig Miller. A shock to Miller, other’s not quite a shock. During his term, Ruth’s Chris profit had plunged and share prices have dropped by 70% during the past year. You would think a CEO being paid millions would have more decency to either resign or automatically forfeit his bonuses for poor performance.

To be fair, we can’t blame the failure of Ruth’s Chris entirely on the Miller and his executive management team. There is clear instability in the US economy with oil skyrocketing and food staples such as flour and rice soaring. On the flip side, a CEO has responsibilities and in tough times, a decision should be made to step in and show you really care for the future of the company.

Miller receives $2.4 million package

Less than two weeks ago after reporting the dismissal of Ruth’s Chris CEO and Chairman, Craig Miller, the company announced a 33% drop in first-quarter profit due to a decline in sales and an insurance claim benefit. More disappointing news came when Ruth’s Chris corporate owned operations posted a 6.9% decrease in sales compared to 1.9% increase for the first quarter of 2007. Even more troubling news was the company revealed Miller would receive a $2.4 million in a severance agreement. Is that amount really necessary? Currently, Ruth’s Chris is searching for a CEO replacement but in the meantime, the company will pay Miller $30,000 a month to consult for six months or until a new CEO is named. In addition, he will receive his annual salary, outplacement services, legal fees and more than 200,000 shares of restricted stock.

If you were Craig Miller, what would you do? From 2004, Miller served as the CEO of the company. Several industry experts have speculated in Miller’s decision making of the buyout of Columbus, Ohio-based Mitchell’s Fish Market, a high-end seafood chain for $92 million. With Ruth’s Chris continuous losses year after year, does Craig Miller deserve an exit package worth over $2 million?

Learning from the Top CEOs

Do CEOs like Miller realize the situation of their company? Disappointing results are posted and little or no improvement is done. Why do CEOs need to be paid so much? They do hold the power to control their salary. Take for example Steve Jobs of Apple who refused to take salary but was so determined to turn the company around. He just didn’t turn it around, he has made Apple one of the most powerful and recognized brands in the world.

In the food business, the real CEO mentor that we all should follow is John MacKey, the CEO of Whole Foods Market, a successful supermarket specializing in organic food. Fortune has named Whole Foods as the Top 100 Best Companies to Work For.

Why so? MacKey believes in transparency, meaning nothing is hidden from the employees. Everyone knows each other’s compensation regardless of position. For Mackey and his executives, they have earned 19 times the average employee pay compared to an average’s CEO compensation of 431 times.

In February 2007, MacKey posted a company memo informing all his employees that he will only accept a $1 annual salary and receive no additional cash compensation. The Board of Directors has agreed to contribute $100,000 annually to a new Global Team Member Emergency Fund helping team members who are in desperate need.

So what is John Mackey’s goal for Whole Foods Market? He is determined to achieve $12 billion in company sales by 2010. Now that is what I call determination and looking out for the best interest of the company. Why aren’t there more CEO’s like this?

Photograph by: jenn_jenn

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3 Responses to “The Compensation of a CEO”

  1. BillyWarhol Says:

    I was never that impressed with Ruth’s Chris Steaks – they ruined my Filet by serving it Au Beurre!! Who the heck pours Butter over a perfectly good Steak!! The $5 Baked Potato + $8 fer 3 Asparagus Twigs ala Carte didn’t help either*

    Thank Heavens our Waitress was Gorgeous!!

    ;) )

  2. slag Says:

    cool blog, interesting format. most restaurant blogs are all about bitching. nice stuff here. very interesting.

  3. FoodServiceNinja Says:

    Billy -MANY places place solid infused butter or melted butter over steaks when plate-never questioned it probably to make the steak look moist and juicy.

    CEO is out of touch with reality-and most of the exit costs you are mentioning were negotitated when the CEO was hired. IN some cases to get the CEO to leave more easily or “quietly” rem they know where skeletons are buried the company would rather stay buried.

    And I think the salary has NOTHING to do with their experience or leadership and all to do with how much they paid the last guy.

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