Real Estate CEO Compensation: Is It Fair?

"Attention Must Be Paid"... Last year, the CEO of CB Richard Ellis received $5.06 million in total compensation. The CEO-Americas of Jones Lang LaSalle received $2.4 million in total compensation. (JLL's top CEO's compensation not available at Yahoo Finance.) And the CEO of Trammell Crow received about $1.4 million. (Source: Yahoo Finance; see also compensation breakdown below.)

Is this fair? Is the CEO of CBRE really worth more than the CEOs of JLL and TCC combined? Search me. Real estate compensation discussions always get me smiling. And yes, I realize these are managers, not brokers!

But the basics of real estate brokerage are pretty simple. A new salesperson joins a firm. The firm has a policy for dividing commissions between the house and the salesperson ("the split"). Is the split fair?

The new agent works occasionally with a more seasoned professional and further splits the commission with his or her colleague. Or maybe the broker works as a team member with other agents. The team agrees to divide up the commission. Is the split fair?

What compensation should the manager/owner receive? Should it be less than a senior broker because the manager/owner takes less risk? Or should it be more because the manager/owner creates an environment where the salesperson can thrive?

And how does all of this apply to large, publicly-traded real estate service companies? Search me. But it's fun to peek at SEC filings and learn more about what "the boss" earns. What do you think is fair?

Compensation Breakdown 2005... CB Richard Ellis: "pay" (salary and bonus) $2.58m (salary of $608k, bonus of $1.972m), stock options exercised $4.95m, Jones Lang LaSalle: "pay" $1.55m, stock options exercised $.89m, Trammell Crow: all "pay," about $1.4m, no options exercised.

Yahoo Finance Definitions: "Pay"... is salary, bonuses, etc. "Exercised" is the value of options exercised during the fiscal year.

Update... CBRE's CEO sold $15m of stock on Jan 3, 2006. JLL's CEO-Americas sold $.54m of stock on Mar 23, 2006. TCC's CEO sold $.83m of stock on Apr 10, 2006.

-- Peter Pike