Home MTA Economics Is the MTA CEO paid enough?

Is the MTA CEO paid enough?

by Benjamin Kabak

While overseeing an annual budget of $13 billion and employments rolls in the tens of thousands, the MTA CEO and Chairman earns $350,000 a year and a housing bonus, but by many accounts — particularly that of the TWU — that compensation is far more than he deserves. Even though a mid-six-figure salary sounds good, there’s an argument to ebe made that New York State is under-compensating the MTA head, and that’s just what Josh Barro put forth on Bloomberg News yesterday.

As Barro argues, we as a society should be willing to pay top government officials far more than we do, in part in order to entice them to stick around and in part in order to entice them to do a good job. As he notes, in the private realm, someone tasked with leading a $13 billion organization would be compensated much better than the MTA head is, and as we saw with Jay Walder, when the right opportunity — notably at triple the salary — comes around, jumping ship is on the table. As Barro argues of recent MTA departures:

Unlike presidents and governors, it’s hard to say that MTA executives are compensated in prestige: As Lhota’s poll numbers make clear, the public generally doesn’t know who runs the MTA, and if they do, they’re predisposed to think he’s doing a bad job. So Walder left for a job that … pays more and Lhota to seek one that would bring greater non-monetary benefits…

Voters expect a lot from top public officials. We want them to be talented managers who run the government well. We want them to stay in their jobs long enough to see projects to completion. We want them not to be corrupt. And we want them to work for a lot less than they could make elsewhere. Dropping the last goal would make it easier to achieve the first three, which is a reason to give Prendergast a big raise.

Over the last few years, we’ve tried to figure out how to get transit executives to stay in place for longer than a year or two. Absent employment restrictions in contracts — which aren’t legally permissible — a higher salary may be the only way to go. It’s a tough argument for the public to swallow, but how else can we retain top talent anyway?

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23 comments

Bolwerk April 24, 2013 - 1:54 pm

Why not? MTA has to compete with other big cities for talent.

Also, higher compensation can discourage corruption. Just link the compensation to performance somehow.

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Nathanael April 25, 2013 - 6:36 pm

Here’s a subtle — or perhaps obvious — point. The current salary would be fine for a job where the occupant was *treated decently* by the higher-up politicians and the union bosses.

Walder took the position out of a desire for public service, and made an admirable attempt to treat everyone decently.

But look how he was treated. $350,000 isn’t enough to compensate for that sort of stress and abuse. We know that when he was poached he was offered a much larger salary, but I’m sure it wasn’t just about the salary — it was also about the working conditions.

As long as politicians refuse to give the MTA appropriate funding, as long as they treat the MTA CEO as a punching bag, as long as the union boss attacks even the most modest proposal for work rule reform with giant inflatable rats, you’ll have to pay tens of millions to get someone competent to deal with that crap.

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Chris G April 24, 2013 - 2:03 pm

I think we all learned if we didn’t already know with Walder that the position is drastically underpaid.

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John Samuelsen April 24, 2013 - 2:39 pm

Sure, triple his salary so long as you triple ours.

John Samuelsen

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Benjamin Kabak April 24, 2013 - 2:46 pm

I realize this isn’t actually John Samuelsen, but that’s basically the reaction we’d get were the state to boost the MTA CEO salary.

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petey April 24, 2013 - 3:49 pm

and, it would be the correct reaction.

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Alex April 24, 2013 - 5:51 pm

The correct reaction to paying a high ranking executive the going rate for similar work elsewhere is to pay blue collar employees far, far higher than the going rate for similar work elsewhere?

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John Samuelsen April 25, 2013 - 11:59 am

Yes
Or do you not support the middle class?

Larry Littlefield April 24, 2013 - 2:43 pm

As I noted, in a comment that disappeared off Bloomberg, the current private market in executive pay is not a real free market. It is more like a very rapacious union negotiating with itself and passing the cost to shareholders.

The run up in executive pay got started in the 1990s, justified by rising stock prices that were later exposed as a bubble. They have continued rising without any justification at all, other than Executive A got X and therefore Executive B deserves X plus 10 percent, in a never ending spiral.

Executive pay consultants are hired to bless this, and are only hired if they are willing to provide the right results. And the directors and top paid labor on two sides of the table are really on the same side. It’s like the politicians and public employee unions negotiating pension increases in Albany.

The pay of the MTA head could perhaps be a little higher, but not much. Perhaps it should be compared with executive pay, and specifically transportation pay, in Europeon countries.

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MichaelB April 25, 2013 - 8:15 am

Not quite. The run up started when the tax code was changed to disallow deductions for salaries over about $1 million except for (basically) stock options. Almost overnight many salaries actually rose to that level in many cases because it became the new ‘standard’. With the booming stock market of the 1990s the stock options became incredibly valuable as well which led to enormous pay packages. With the early 2000s recession companies sought to keep total comp at the inflated levels of the 1990s which led to ever more creativity culminating in the options backdating scandals a few years ago.

The executive pay consultants meanwhile got a huge boost when SEC rules were changed to mandate disclosure of senior executive pay, also in the 1990s I think. Prior to that rule executive compensation was very closely held and the consultants didn’t have much data to say what competitors paid. When the rule was changed the theory was that it would put downward pressure on executive salaries. Oops.

I’d say though that the real upwards ratchet isn’t so much the top paid, but the bottom. No one ever wants to say their guy is below average. Without fail the consultants propose an above average package… and guess what happens to the average!

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Nathanael April 25, 2013 - 6:38 pm

The real problem with the MTA CEO position is, as I mentioned above, not the pay, but the working conditions. “All of the blame, none of the power” is possibly the most unattractive job condition possible, and talented people won’t take that job unless they’re paid exorbitantly.

Rather than changing the pay, what needs to change is the attitude: the MTA CEO has to be treated as something other than a punching bag.

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Matt April 24, 2013 - 2:58 pm

If you read about effective compensation – especially monetary compensation – it’s said that the best (and only truly effective) use of a salary is as a means of retention.

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Ken April 24, 2013 - 3:50 pm

How much real authority/influence does the MTA chairman have? Can the chairman save or influence millions/billions in savings or capital expenditures? If yes, a pay raise is definitely required.

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al April 24, 2013 - 4:19 pm

Double salary for every halving of MTACC cost. Get subway construction down to $600 million/mile and get a $1.4 million salary.

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Larry Littlefield April 24, 2013 - 6:31 pm

Not possible due to members of the state legislature, who get paid far less. Over the table.

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Chris C April 24, 2013 - 4:44 pm

As a comparison (but not direct due to different governance structures) Peter Hendy who is Commissioner* for Transport for London gets paid approx £330k ($ 500k) per annum with no housing allowance.

* The closest US term I can think of that would match this would be the ‘President’ (Chief Executive) role of the MTA.

UK governance structures (especially in the public sector) generally do not allow a mixed appointment of Chair (especially an ‘Executive’ chair) of the Board and Chief Executive.

The Board of TFL is chaired by the Mayor of London.

Nor is the appointment of the Commissioner a political appointment in the gift of the Mayor. Peter Hendy was appointed to the role by Ken Livingstone (the previous Mayor) and his appointment did not fall when Ken was replaced as Mayor by Boris Johnson and not did it have to be re-ratified by the new mayor.

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Larry Littlefield April 24, 2013 - 6:33 pm

As I thought, the pay may be a little low, but it isn’t THAT low. Except in comparison with overpaid U.S. corporate (and non-profit!) executives.

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Nathanael April 25, 2013 - 6:40 pm

The big difference is that TfL gets decent levels of funding, and strong support from both Mayor and Prime Minister. Whereas the MTA… doesn’t.

It’s much easier to get good people if they’re working for an organization which is being given sufficient resources and respect.

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Larry Littlefield April 26, 2013 - 5:07 pm

Accepting being a punching bag seems to be a job requirement. Any who cared about transit would have punched back a long time ago.

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Rachel April 24, 2013 - 10:10 pm

No not when the city’s workers take their lovely time doing construction work, and not when the city puts up the price on metro card

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Chris C April 25, 2013 - 4:33 pm

except that

lots of construction is done by the private sector

and

the MTA is not a NYC City entity if it were the Chairman would be appointed by the City and not by the Governor

http://en.wikipedia.org/wiki/M.....Governance

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Tsuyoshi April 25, 2013 - 10:57 am

It would seem to me that it’s hopeless to compete with private-sector executive compensation, which is unreasonably high here to begin with.

However, making sure the MTA executive pay is comparable to the executives of other, similarly-sized transit agencies in the English-speaking world would be prudent. But it’s not a long list: London, Hong Kong, and maybe Singapore. There’s not much competition for talent here. Other transit agencies are either much smaller, or would be very unlikely to hire a foreigner who doesn’t speak the local language.

So… London is paying $500k and Hong Kong is paying $900k, while we’re paying $350k. Considering how many other things in the MTA are underfunded, it seems an acceptable though unfortunate difference. It’s basically just one more example of things the MTA should be spending more on.

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Arn August 6, 2015 - 12:34 pm

Hey, MTA, I can do the same crappy job as Prendergast for 1/3 of what you guys are paying him! Just get in touch.

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