Executives salary

[Stunt]

So this has been a topic of discussion for as long as I can remember but for the most part turns into partisan bickering over free labour markets and how evil the rich old boys club is. I think we can all agree that some of these golden parachutes are getting excessive and executives seem to be justifying their wages by comparing to other institutions compensation packages causing a long term inflation of wages. Obviously the right leader has a huge impact on the vision of an organization and he/she has the biggest impact on growth and profitability. They deserve a larger compensation than all others in the organization but why not set standards to regulate and restrict compensation to more 'reasonable' levels. I know it's naive for me to determine reasonable compensation with nothing to compare to but I'm sure if we used the same formula for all companies we'd be able to work out the discrepancies.

Example:
Why not base executive salary using the following criteria in a weighted formula:
- lowest wage offered to full time employees - for baseline
- increased profit, shareholder value - for minor but significant increases above baseline
- bonuses would represent a much lower value of salary (even if salaries get boosted)
- percentage of money issued to payroll employees vs. temporary/contracted workers - to prevent outsourcing of cheaper labour (boosting the baseline)
- location of executive's corporate location - cost of living allocation
- turn-arounds would be given one off bonuses but salary would revert to core values above after completed. Turn around status would not be issued unless company has experienced a significant event - ie. negative profit

Our current tax code already favors certain incentives like getting married, having kids, investing, obeying the law, donating to charity...all with associated tax rates or metrics. Applying this to executives wouldn't be all that radical of a concept even for fiscal conservative types like myself. I mean these would still be the best paying jobs in the country, there is no disincentive to taking on these positions. Maybe we'd see less wage erosion on the bottom end and clarity for shareholders.

 

[JohnCU]

no they are derived on imaginary numbers, the execs make $j60 million a year

 

[Engineer]

Originally posted by: JohnCU
no they are derived on imaginary numbers, the execs make $j60 million a year

Funny, I guess except when you see on NBC (tonight) that AIG execs decided to exclude losses when calculating their bonuses both this year and last. Nice, really nice.

 

[JS80]

A lot of the comp published are extremely biased. I hate defending that fucker Fuld but a lot of his comp was restricted stock, which became worthless when it went under.

But in a nutshell this is how corp wages are derived:
comp committee of board hires a comp consulting firm on "market" pay package
they come back and give base wage, benefits, bonus plan, option plan and restricted stock plan
they set financial goals based on certain metrics
these financial goals more or less are cakewalk and hard to miss
even if the exec reaches 80% of goal they get paid

 

[Stunt]

So lets say you have Company X
The lowest wage offered in the company is $7/hr = $700,000 in baseline
The shareholder value was given a rating of 6 by vote by shareholders = $120,000 in bonus
There were 10% of money allocated to contractors/temps = -20% of baseline = -$140,000
Location of head office is in Chicago with 2/3 cost of living relative to NY = 0.66 multiplier
Size of company is large cap = 2 multiplier
Total salary = $898,000 including all bonuses.

Now company Y...
The lowest wage offered in the company is $12/hr = $1,200,000 in baseline
The shareholder value was given a rating of 8 by vote by shareholders = $160,000 in bonus
There were 20% of money allocated to contractors/temps = -40% of baseline = -$480,000
Location of head office is in Chicago with 2/3 cost of living relative to NY = 0.66 multiplier
Size of company is small cap = 0.5 multiplier
Total salary = $580,000 including all bonuses.

I dunno...something along those lines obviously they could be weighted higher...

 

[Lemon law]

I very much agree, I can understand why a very good professional athlete preforms so much above the norm that they are worth it. When it comes to Ceo's, we have totally irrational system gone crazy.

We have the ability to regulate publically held corporations, and if we do not stop this craziness, those same Ceo's can and have robbed us blind.

50 million plus golden parachutes for total idiots are now the norm, the thing that is abnormal is our lack of us stopping this total crapola.

 

[JS80]

Originally posted by: Stunt
So lets say you have Company X
The lowest wage offered in the company is $7/hr = $700,000 in baseline
The shareholder value was given a rating of 6 by vote by shareholders = $120,000 in bonus
There were 10% of money allocated to contractors/temps = -20% of baseline = -$140,000
Location of head office is in Chicago with 2/3 cost of living relative to NY = 0.66 multiplier
Size of company is large cap = 2 multiplier
Total salary = $898,000 including all bonuses.

Now company Y...
The lowest wage offered in the company is $12/hr = $1,200,000 in baseline
The shareholder value was given a rating of 8 by vote by shareholders = $160,000 in bonus
There were 20% of money allocated to contractors/temps = -40% of baseline = -$480,000
Location of head office is in Chicago with 2/3 cost of living relative to NY = 0.66 multiplier
Size of company is small cap = 0.5 multiplier
Total salary = $580,000 including all bonuses.

I dunno...something along those lines obviously they could be weighted higher...

It's more like Revenue goes up 5% bonus $5 million, 4% 4 million, etc. Revenue drops 10%, you still get $2 million.

I've seen some of the targets and plans. Most CEOs can not show up and hit their targets.

 

[BoberFett]

Originally posted by: Lemon law
I very much agree, I can understand why a very good professional athlete preforms so much above the norm that they are worth it. When it comes to Ceo's, we have totally irrational system gone crazy.

That's stupid. If you can understand athlete pay how are CEOs any different? There's no guarantee of performance based on an athlete's contract.

Sounds like maybe you're just a sports fan protecting your hobby.

 

[Stunt]

There could even be a provision for international companies where wages are compared to the average worker. Like instead of having the minimum wage at $0.50 an hour in China, this would represent an effective $8/hr given the purchasing power of their money and could be averaged among other nations or even all the people at the lowest wage in each country. Some way to get that baseline where all the wealth isn't just generated at the top and there's no incentive to just hammer the crap out of the little guy.

 

[Ozoned]

A company that recruits a ceo is competing in a Global market. There is no Global oversite uberdude to enforce the rules that you might wish to impose.

 

[wetech]

Originally posted by: Engineer

Originally posted by: JohnCU
no they are derived on imaginary numbers, the execs make $j60 million a year

Funny, I guess except when you see on NBC (tonight) that AIG execs decided to exclude losses when calculating their bonuses both this year and last. Nice, really nice.

They were refering to unrealized mark to market losses. If the trades that cause the losses are held until maturity, the mtm comes back up towards par, less any actual losses on the trades. So when that happens, and the company sees 10's of billions in mtm gains, should bonuses reflect the suddenly huge profits?