The Atlanta Journal-Constitution
It’s lonely at the top, but the pay is still great
Compensation for many of the state’s corporate leaders is heading upward, even where shareholder returns and profits lag.
Georgia’s biggest companies wrestled with the bad economy just as the rest of us did in recent years. But the pay for their top executives grew quite a bit faster than shareholder value did, and some investors don’t like it.
After several tough years on Wall Street, investors in Georgia’s largest companies are finally starting to get paid back for their troubles.
But the corporate captains at those same companies have been getting paid much better.
Chief executives’ total compensation at Georgia’s 13 largest companies rose almost 29 percent over the past five years — more than double the growth of shareholders’ returns at those companies. By comparison, a shareholder would have reaped a 12.9 percent return during the same five-year period, after investing equally in the 13 compa- nies, including re-invested dividends.
Likewise, CEO pay at the companies on the Fortune 500 list rose four times faster than the firms’ combined profits, which squeaked up barely 7 percent in five years.
Coca-cola CEO Muhtar Kent had the highest compensation last year — $29,115,573, mostly in cash and stock-related pay. That was a 17.5 percent raise over his 2010 pay.
Newell Rubbermaid, which saw its profits and stock price fall dramatically over the past five years, awarded the biggest jump in pay last year when it hired Michael B. Polk as its new CEO last June.
Polk’s $18,772,721 compensation package included a big stock award to replace unvest- ed stock he gave up at his previous employer. It was a 58 percent jump over the 2010 pay of his predecessor, Mark Ketchum.
Locally and nationally, big shareholder-owned companies are printing such billboard-size paychecks as many employees continue to struggle with meager pay raises. For example, the average annual paycheck in Georgia has risen less than 15 percent since 2006, to $42,590 last year, according to the Bureau of Labor Statistics.
Critics say the gap between CEO and worker pay is unjustified.
“You have to ask yourself, how much is enough?” said
Most people don’t think twice about storing photographs or music files on Internet-based services like Picasa or itunes.
Similarly, every day, an untold number of businesses upload their company data to a variety of cloud computing applications and services.
Their sensitive data and intellectual property is housed on networked servers, located in remote places like … well, we don’t really know where they are.
So what is the cloud, anyway? The term actually originated from the visual representation of the Internet on network diagrams as a “cloud.” In the broadest terms, it is providing computing resources like servers, networks and software over the Internet.
From a business perspective, think of it as renting a complete business application, like your inventory or general ledger system, online. No server to buy, no network to configure, no data center to build. Just go to the website, sign up and start entering transactions.
It is easy to see why small- to medium-size businesses are enticed into the cloud by the potential cost savings and ease of use. From a budgetary standpoint, using the cloud is a great way to reduce capital expenditures.
In the cloud, businesses don’t need to spend thousands up front on servers and network hardware or on the staff to manage the equipment. Cloud computing is generally designed to be a “pay-as-you- go” service.
But is putting important company data into the cloud really safe? What happens to company information? How can companies continue to effectively manage their information once it’s handed over to a third party?
Companies often pursue cloud computing without adequate consideration for what they are ultimately trying to achieve. Simply moving existing applications to the cloud to save on capital expenditures is not a sound strategy. Certain business processes and applications require a high degree of control and privacy that may not be suitable for cloud computing. Before you sign a cloud computing contract, be sure you understand the risks as well as the benefits that such a move will entail.
Competitive advantages
The cloud offers tremendous flexibility, especially when trying to manage spikes in demand for computing resources. Businesses can spin up additional servers in minutes to handle rapid increases in traffic, such as when an online retailer has to maintain quick response time on its website during the holiday season. This rapid scalability of the cloud can be a competitive advantage to certain types of businesses.
But what about security?
Isn’t the cloud more dangerous than a private data center? Not necessarily. A smallto medium-size business has very limited security resources when compared to Amazon, Google or Microsoft. Cloud services generally have security “baked in” as part of the service. It’s a major concern for all cloud providers and is often better than the security that can be provided in a private computing environment. In addition, because these resources and expertise are shared among many customers, they are less expensive, just as computer hardware and other pooled services are.
New risks
A fundamental change takes place when a company moves to the cloud: It loses a certain amount of control over its own data. While this may be a frightening scenario for many, it is possible to minimize the impact of this shift in control by understanding and addressing the new risks associated with cloud computing.
Multi-tenancy, or the sharing of hardware and software with other unknown businesses, is not a concern with private computing, but is a common practice in the cloud. Many cloud providers, especially softwareas-a-service providers, regularly commingle data in a common database, so you should understand how your company’s data will be separated from that of others.
It’s in the fine print
Because cloud computing is relatively new, it lacks a broad- ly accepted standard for secure access and data handling. This manifests itself in contracts and service level agreements (SLAS) that favor the cloud provider. Clearly defining expectations will make the difference in effectively protecting company and employee information. Some expectations include: Ensure that adequate steps are being taken by your cloud provider to protect your company’s data. The contract with the cloud provider should include minimum security and infrastructure practices, require that security practices be regularly updated and should include provisions for third-party audits to confirm compliance.
Contracts should also address how the vendor manages sensitive data such as Social Security numbers and patient medical information. Laws that cover consumer privacy, Social Security numbers and security breach notifications are all in place to protect company information; confirm that the cloud provider is abiding by them.
Lastly, be sure a contract covers the “what ifs.” If a cloud provider goes bankrupt or is acquired by a competitor, what happens to your data? If you decide to change providers, how and when does the data get moved? After it has been moved to the new provider, does it get destroyed at the old provider?
While cloud computing is all the rage these days, it is really in its infancy. As the industry matures, service standards and contract terms will also mature in order to address the new risks. In the meantime, it’s up to each company to understand the benefits and pitfalls associated with the cloud.