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CEOs make a lot more than you think they do, here's why
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If you made this much money, you would try to keep it on the down-low as well. Here's how much CEOs are making and how they're spending their money. - photo by Sam Turner
How much do you think the average CEO makes, $500,000? $1 million?

A new survey on public perception of CEO compensation by the Stanford Graduate School of Business found that Americans believe that Fortune 500 CEOs take home about $1 million annually, and they think it's too much. Of the 1,200 Americans surveyed, 74 percent think CEOs are overpaid.

That's before they find out that on average, American CEOs make much more than $1 million a year.

According to the Atlantic, the median annual salary for a Fortune 500 CEO is over $10 million (median $12.2 million). Today's CEOs make between 210 and 300 times the average salary of their employees.

CEO compensation figures are much higher than the public is aware of, Stanford Graduate School of Business professor David F. Larcker told the Atlantic. In many parts of the country, it is incomprehensible that anyone can earn this much money.

Indeed, some readers may be shocked by these seemingly exorbitant salaries, but executives understand that a lot of factors go into determining a CEO's pay most of them having nothing to do with greed.

In a letter to American Enterprise Institute, one Fortune 500 CEO explained the process by which CEO salary is determined and expressed concern about the high salaries of underperforming CEOs. This CEO asked AEI not to print his name.

The CEO, who made three times the salary of the next-highest-paid executive in the company, said that his high salary didn't weigh down his conscience most of the time.

"I made nothing like the really obscene compensation of some CEOs, of which there are a goodly number of examples, let alone of the athletes, private equity founders and, worst, the entertainers," the CEO told AEI. "So I slept okay, although admittedly not always and not without some anguish."

He goes on to explain that CEOs' salaries typically grow so much because they are performance based. If a company grows by 20 times under the current CEO (not uncommon), his or her salary will increase proportionately.

The problem is when CEOs make enormous amounts of money, even when their performance is average or poor. This happens because companies don't want their CEO to make less than average and therefore reflect poor performance.

This means that while average and poor performing CEOs receive an "average" salary, outstanding CEOs expect to be paid more than average, thus raising the average. The process repeats itself and CEOs' salaries continue to go up each year.

How to resolve the issue of overpaid CEOs is uncertain. The Atlantic reports that the Stanford survey asked Americans, and about half thought that the government should be involved in determining CEO salary limits.

But implementing government regulations to rein-in CEO compensation would be difficult. As Forbes contributor Adam Hartung puts it, "Americans cant even hardly agree on whether there should be a minimum wage at all, much less where it should be set."

Hartung also said that after the Supreme Court ruled on Citizens United that corporate campaign spending cannot be restricted, large companies will use their financial power to lobby against government interference in setting private compensation rates.

Even if you take for granted that CEOs' salaries won't be coming down anytime soon more than likely they will keep going up you might wonder what they do with all that money.

Their expenditures usually hover somewhere between the substantially charitable, the lavishly excessive or some combination of the two.

According to Time, some prominent examples include a $131 million yacht commissioned by Apple's former CEO Steve Jobs. Jobs died before the yacht's completion.

Other big-ticket items purchased by rich CEOs include the Los Angeles Clippers basketball team, bought by Microsoft CEO Steve Ballmer, and the Hawaiian island of Lanai, 98 percent of which is owned by Oracle CEO Larry Ellison.

On the reverse side, some such as former Microsoft CEO Bill Gates and Facebook CEO Mark Zuckerberg have donated or pledged billions of dollars to charitable organizations.

"Our hopes for your generation focus on two ideas: advancing human potential and promoting equality," Zuckerberg said in a letter published on Facebook where he announced he would donate 99 percent of Facebook shares to charity.

"Advancing human potential is about pushing the boundaries on how great a human life can be. Promoting equality is about making sure everyone has access to these opportunities regardless of the nation, families or circumstances they are born into."
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New Medicare cards are in the mail and scammers are on the prowl
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The Centers for Medicare and Medicaid Services has begun mailing new Medicare Health Insurance ID cards. The program no longer uses Social Security numbers to identify people. - photo by Lois M Collins
The federal government is beginning to send out new ID cards to the 58 million Americans who benefit from Medicare. But since many of the people who will receive them don't know they're coming or why, scammers are already gearing up to take advantage.

An AARP survey shows as many as three-fourths of Americans 65 and older have no idea the cards are coming, so some individuals may be duped with claims that they're supposed to pay a fee or provide personal information that will be used, instead, to defraud them.

The new cards are the first reissue in years, and the most striking part of the redesign is that the cards no longer carry the beneficiary's Social Security number. Congress mandated the removal of that number as an identifier for Medicare beneficiaries by next April. Instead, the card has a Medicare Beneficiary Identifier number, an 11-digit combination of numbers and letters.

The new Medicare cards are now being mailed out in batches, starting with the Eastern seaboard and moving west. Most Medicare beneficiaries will receive their cards over the next six months, as long as the Centers for Medicare and Medicaid Services (CMS) has their correct mailing address. Once the cards are in hand, people can share the new identification number with their health care providers. During a transition period, either card is valid.

The old cards, which used Social Security numbers as the personal identification number, should be destroyed.

AARP recently launched an education campaign to warn consumers about scams related to the new Medicare cards.

The membership organization's "Fraud Watch" consultant, Frank Abagnale reformed con man, scammer and the subject of the movie and book "Catch Me If You Can" tells senior citizens the only time they need to carry the actual Medicare card is to health care appointments. Otherwise, it should be left in a safe place. If they want to carry one in their wallet or purse, he says, make a copy and black out the first seven numbers.

Since the cards were announced, scammers have already:

  • Called seniors and asked for their bank account information so that money on their old card could be returned. There is no money on the old card and CMS never asks for personal information over the phone.
  • Offered to send the new card after Medicare beneficiaries pay a $25 fee to cover expenses related to the card. The card is free.
  • Said the card will be mailed out as soon as the older person verifies his or her Social Security number, mailing address and other personal information. CMS already knows the beneficiary's Social Security number and it's no longer being used in conjunction with health care.
AARP and the Federal Trade Commission will hold a free online seminar about the cards and the fraud attempts they have spawned on Thursday, April 19, at 7 p.m. EDT. Register at: www.aarp.org/FraudWebinar. CMS also offers a "frequently asked questions" guide to the new cards.

The AARP Fraud Watch Network says consumers can sign up for its Watchdog Alert emails that deliver breaking scam information, or call a free helpline at 877-908-3360 to speak with volunteers trained in fraud counseling. Abagnale also hosts a weekly podcast for AARP, called The Perfect Scam.
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