Global CIO: Why IBM CEO Palmisano Earned His $24.3 Million

"IBM reported $13.4 billion in net income for 2009, up 8.8%, with record earnings per share of $10.01," writes the Journal in the article cited above. "Revenue fell 7.6% to $95.8 billion. The software and services giant bumped up its dividend to $2.9 billion in 2009 from $2.6 billion in 2008. In a letter to shareholders, Mr. Palmisano wrote that IBM is poised to 'outperform our industry and the market at large' as the economy recovers in 2010."

And that is precisely where the fallacy of the class-warfare arguments about Palmisano's pay is revealed: as with any public company, the job of the IBM CEO is not to maximize the size of the company's workforce, but rather to maximize its profitability, its relationships with customers, its future growth and success opportunities, and its new-product development.

Meanwhile, a chapter of the Communications Workers of America union that is supposedly trying to represent IBM workers dug deep into its bag of incendiary language and came up with these comments about IBM's layoffs and Palmisano's compensation via an article on localtechwire.com:

"IBM CEO Palmisano's pay and compensation of $21 million is outrageous given the firing of over 10,000 employees in 2009 and the recent firing of 2600 more this year," said Lee Conrad, one of Alliance@IBM’s executives and a retired 26-year IBM veteran. "Those ex-employees and their families are struggling in an economic recession where companies like IBM increase profits on the backs of working families," Conrad added. "Where is the humanity and remorse of executives like Palmisano? It is clear they do not see or care what happens to employees and former employees who through their labor and expertise help him and other executives become richer."

In fact, Mr. Conrad, you and your fellow anti-capitalists should be thanking Sam Palmisano for navigating the company through such a tumultuous time in the global economy and for creating an operating model whose financial stability allows the company to employ more than 100,000 workers in the U.S.

Rather than 'not seeing or caring' about IBM employees, Palmisano has led IBM to a position as one of the world's most respected, successful, and innovative companies, and no CEO can "give" anything better than that to employees.

As I've said before, layoffs are a sad and sometimes-awful element of free-market capitalism. But sometimes they're the right choice for CEOs to make because the objective of public companies is not maximum employment—it's maximum success for customers, owners/shareholders, and then employees.

And while IBM's layoffs are unfortunate, CEO Sam Palmisano deserves every cent of the $24.3 million he earned for 2009. I hope he has an even better year in 2010 because that will mean that IBM's customers, shareholders, and employees will also have had a better year as well—and the only "remorse" anyone should feel from that will come from the anti-capitalists whose fringe commentary will only become more irrelevant.

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