For years, I have heard talk about excessive executive pay in America. So, I picked a company at random and decided to look at their financial numbers. Below, is the income statement for Transocean. As you can see, they reported a loss for the year 2019.
The next Figure lists the pay for the top five executives at at Transocean. Now, let me get one thing clear. Although I do have an MBA in Finance, I am not a seasoned professional at studying these things. So, let me just throw that out there that I am only making suggestions.
For the year 2019, let us assume that the total compensation for the top executives at Transocean goes down in the income statement as salaries related to operating costs. Total compensation of the 5 comes out to be $24.4 million. Now look at the following percentages:
- Compensation relative to Revenues: 0.79%
- Compensation relative to Costs and Expenses: 0.77%
- Compensation relative to General and Administrative Costs: 12.6%
- Compensation relative to Net Loss: 1.94%
As I mentioned, I am not a trained expert in analyzing financial statements; but nothing looks too far off. There are some things we are not allowed to see, however, things that public companies do not have to reveal. According to my understanding, these items include details like: executive travel, executive hotels costs, executive expense account, company car, executive suit remodeling costs, etc. These fringe benefits go down as costs but not as compensation.
I just wonder how much money is spent as a benefit to the executive and simply is reported as operating costs, and not as a fringe benefit: $1000 per night hotel rooms, $1000 business dinners, free use of the company lake house, etc, etc, etc.
I truly am not an expert at analyzing these things. Thus, please send me any helpful comments that can help my understanding of how this all comes together.