Do you have questions about our editorials? Questions about hot topics in the news? Each week, the editorial team responds to readers of The Press.
You denounce the huge salaries of CEOs, but what about professional athletes?
Andre Denis
Recently, soccer player Cristiano Ronaldo signed a contract – hold on tight – for 400 million euros (575 million Canadian dollars) with a team from Saudi Arabia.
Half of that money comes from his two-and-a-half-year contract to play soccer. The other half is granted to him to promote the candidacy of this Islamic monarchy for the World Cup of 2030.
We are talking here about a country where human rights are blithely flouted. A country, too, which is waging war by proxy against Iran on the territory of Yemen, maintaining a bloody civil war there which has left hundreds of thousands dead.
For the values, we will go back. For judgment too.
If we’re talking strictly about salaries, baseball is another sport where we are witnessing an escalation. Last December, Aaron Judge broke the bank by signing a $360 million, 9-year contract with the Yankees.
In golf, Phil Mickelson collected 110 million US last year, according to Forbes. Not to run a company with thousands of employees, but to hit balls on lawns. Note that he too now receives income from Saudi Arabia.
Of course that raises questions. Of course these athletes are grossly overpaid.
Michel Magnan, holder of the Stephen Jarislowsky Chair in Governance at Concordia University, and Sylvie Saint-Onge, professor in the Department of Management at HEC Montreal, believe, however, that it is wrong to compare the remuneration of CEOs with that of stars.
In a text written in 2008 in the journal Management, the two experts support interesting arguments. Let’s examine them.
First, the authors argue that it is much easier to assess the performance of a star than that of a business owner. And that when the premiere is successful, it’s largely down to its own merit.
“We know it’s Tiger Woods who hits the ball and racks up the wins. We also know that it is Celine Dion who is on stage, who sings and who sells records and show tickets. Conversely, a rise in a company’s stock market value or earnings may have little to do with its managers, but may be the result of other factors beyond their control,” they write.
A distinction can certainly be drawn here between entrepreneurs and managers who run established companies. Elon Musk, one of the richest men in the world, generated his fortune through his own ideas, taking risks and building companies like Tesla and SpaceX. In Quebec, for example, this is also the case of Max Dasilva, founder of Lightspeed.
Conversely, the leaders of Canada’s major banks run companies that existed before they settled into their CEO chairs. And who, we can bet, will survive their departure.
Michel Magnan and Sylvie Saint-Onge also cite a study which shows that when a CEO dies suddenly, the stock market share of the company he was leading, far from falling, generally rises. This is because the board can then reorganize senior management for betterment.
A sports team that loses its star player, on the contrary, generally sees its performance and income decline (although it can be fun to find exceptions).
The authors then point out that CEOs choose directors who set their compensation and exercise some power over them. This is not the case for athletes and stars, who negotiate according to the laws of the market.
Another argument: the “useful life” is generally longer for a CEO than for a star. An athlete is considered old at 35, and many artists experience a few lucrative years before sinking into oblivion. CEOs, on the other hand, are offered “golden parachutes” when they leave office and generally have generous pension plans.
In any case, if we consider the remuneration of athletes and stars indecent, this should not be an argument to justify the excessive sums paid to CEOs.
