Sky-high CEO pay is tied to what peers get, not how company does

[bfdd]

In summary: "Most companies are fucked, only do businesses/have a relationship with the few that aren't". This is a realistic option for the overwhelming majority of Americans. Especially the 20%+ that are unemployed/underemployed.

you know you can actually go be a revolutionary phokus. no one is stopping you except yourself. stop bitching and fucking moaning and get off your goddamn ass and kill some people then. god all you fucking whiners, this is why i goddamn hate hippies. you fucking whine and whine and bitch and fucking moan and wait for your savior. you idolize idiots like che who actually had the fucking balls to do it. pussies.

 

[Nebor]

In summary: "Most companies are fucked, only do businesses/have a relationship with the few that aren't"

They're PRIVATE companies. If they want to make decisions for the short term benefit to traders & CEOs and sacrifice the company's long term well-being and those long term investors then that's their decision. They likely won't exist as a company in the long term as a result. Oh well, the rise and fall of companies has been going on for a long time.

Now if you want to nationalize those companies and have them run by the government, then you would have some say in things as a citizen. But as it is you may as well be crying that your dad gives your big brother the biggest allowance because he's his favorite.

 

[Atomic Playboy]

how are you going to attract the best CEO's to run your company without offering comparable compensation?

getting a 'value' CEO to run you company can run you, shareholders, and employees into the dirt.

I'm pretty sure I could have done just as well with Lehman Brothers as Richard Fuld at a fraction of the price. Or how about the guy who just left HP after 1 year? He tanked their stock but still made over $20 million, including over $2 million in bonuses... I guarantee, if you made me CEO of HP, I will tank their stock for a mere $1 million. That's a fucking STEAL!

The thing is, we hear stories all the time about CEOs getting golden parachutes in the form of bonuses and exorbitant severance packages from companies where they ended up driving the company to the point of bankruptcy. Why should tens of thousands of lower employees be fired so that one man can pocket $20 million as he simultaneously pushes the company near bankruptcy? It's not logical to reward such colossal failure. It would be like instituting the death penalty for all murders, unless you managed to kill at least 500 people, at which point you'd be granted a full pardon. It is completely asinine that we paid the men and women who instituted a global economic collapse hundreds of millions of dollars as if they were doing a good thing.

 

[Nebor]

you know you can actually go be a revolutionary phokus. no one is stopping you except yourself. stop bitching and fucking moaning and get off your goddamn ass and kill some people then. god all you fucking whiners, this is why i goddamn hate hippies. you fucking whine and whine and bitch and fucking moan and wait for your savior. you idolize idiots like che who actually had the fucking balls to do it. pussies.

When I read about people with masters degrees from American universities fighting in the Libyan rebel army, I remember thinking, "None of those gutless, crybaby, latte sipping liberals in America would EVER put down his ipad and pick up a gun."

It's all just loudmouth bitching and moaning. They say they're being oppressed and taken advantage of, but they make no move to either move into the (supposedly) advantageous position of the oppressor, OR to radically change the system. Instead they put on zombie makeup and post on internet forums.

 

[Nebor]

It would be like instituting the death penalty for all murders, unless you managed to kill at least 500 people, at which point you'd be granted a full pardon.

That actually sounds totally badass.

 

[bfdd]

When I read about people with masters degrees from American universities fighting in the Libyan rebel army, I remember thinking, "None of those gutless, crybaby, latte sipping liberals in America would EVER put down his ipad and pick up a gun."

It's all just loudmouth bitching and moaning. They say they're being oppressed and taken advantage of, but they make no move to either move into the (supposedly) advantageous position of the oppressor, OR to radically change the system. Instead they put on zombie makeup and post on internet forums.

He acts like we're the ones that don't care lol. We offer up solutions, he has more excuses. Yeah, we're the fucking problem. What a little bitch.

 

[Phokus]

I do agree that money isn't speech and that organizations are not people. If they are GOP talking points, that has no basis on my opinion of them. My personal experience in many different levels of labor and white collar work along with observation of the world around me with all the failing small and medium business. The key isn't to writing more regulation though. The key is to ripping back the bullshit regulations that have been piled on top giving big business the advantage. Sure we think all these goodie good regulations for the environment are "helping" us. They don't help anyone but line the pockets of the people that paid to have it written. We might think adding extra regulations on top of just forcing the government to protect our first amendment rights is a good thing because it "protects the little man" lol no it doesn't. It just uses government to create more big men at the top, you know those guys we like to call "union leaders".

Here, meet reality:

http://economix.blogs.nytimes.com/2011/10/04/regulation-and-unemployment/

These results are supported by surveys. During June and July, Small Business Majority asked 1,257 small-business owners to name the two biggest problems they face. Only 13 percent listed government regulation as one of them. Almost half said their biggest problem was uncertainty about the future course of the economy — another way of saying a lack of customers and sales.

The Wall Street Journal’s July survey of business economists found, “The main reason U.S. companies are reluctant to step up hiring is scant demand, rather than uncertainty over government policies, according to a majority of economists.”

In August, McClatchy Newspapers canvassed small businesses, asking them if regulation was a big problem. It could find no evidence that this was the case.

“None of the business owners complained about regulation in their particular industries, and most seemed to welcome it,” McClatchy reported. “Some pointed to the lack of regulation in mortgage lending as a principal cause of the financial crisis that brought about the Great Recession of 2007-9 and its grim aftermath.”

The latest monthly survey of its members by the National Federation of Independent Business shows that poor sales are far and away their biggest problem. While concerns about regulation have risen during the Obama administration, they are about the same now as they were during Ronald Reagan’s administration, according to an analysis of the federation’s data by the Economic Policy Institute.

 

[bfdd]

I'm pretty sure I could have done just as well with Lehman Brothers as Richard Fuld at a fraction of the price. Or how about the guy who just left HP after 1 year? He tanked their stock but still made over $20 million, including over $2 million in bonuses... I guarantee, if you made me CEO of HP, I will tank their stock for a mere $1 million. That's a fucking STEAL!

The thing is, we hear stories all the time about CEOs getting golden parachutes in the form of bonuses and exorbitant severance packages from companies where they ended up driving the company to the point of bankruptcy. Why should tens of thousands of lower employees be fired so that one man can pocket $20 million as he simultaneously pushes the company near bankruptcy? It's not logical to reward such colossal failure. It would be like instituting the death penalty for all murders, unless you managed to kill at least 500 people, at which point you'd be granted a full pardon. It is completely asinine that we paid the men and women who instituted a global economic collapse hundreds of millions of dollars as if they were doing a good thing.

I will gladly bankrupt any fortune 500 for 3 dollars. I'll do all of them at 1.50 a piece.

 

[Phokus]

He acts like we're the ones that don't care lol. We offer up solutions, he has more excuses. Yeah, we're the fucking problem. What a little bitch.

You idiots don't offer up shit except 'kill people' and 'live like a caveman'.

 

[Nebor]

You idiots don't offer up shit except 'kill people' and 'live like a caveman'.

Mainly because we're ok with the status quo. You're the one screaming that the sky is falling and that things are terrible and that something must be done.

Every year I've been alive my quality of life has improved, my income has increased (current military service not withstanding) and my opportunities have multiplied. The same is true for the majority of people that I grew up with.

Thus I have little sympathy for people that would rather scream, cry and throw tantrums in a little protest rather than join the people they're protesting in actually doing some god damn work.

 

[bfdd]

ROFL PHOKUS!! You reply to me with a SYMPTOM of the problem after I gave you some solutions? PLEASE FUCK! Don't tell me you're this stupid.

 

[bfdd]

You idiots don't offer up shit except 'kill people' and 'live like a caveman'.

So you're angry that you can't make your own iphone? That sounds like a yp.

 

[Mursilis]

How does CEO pay impact your ability to be successful and make money?

(Hint: it doesn't because it is irrelevant)

Pay is dictated by the free market. There is a world full of people with your skill set so you cannot expect to make that much money.

If you believe any of that, you're just not paying attention. Since I've got some decent $$ in S&P index funds, the disincentives and effects on the bottom line of CEO pay definintely impact my ability to be successful and make money. And if you think CEO pay is subject to the free market, you're simply a fool. It's hardly "free market" to have your 6-10 best friends vote on your pay package.

I RARELY agree with Phokus, but he's dead-on correct in this thread. Executive pay is one area in which the gov't should increase its role.

 

[Mursilis]

I'm pretty sure I could have done just as well with Lehman Brothers as Richard Fuld at a fraction of the price. Or how about the guy who just left HP after 1 year? He tanked their stock but still made over $20 million, including over $2 million in bonuses... I guarantee, if you made me CEO of HP, I will tank their stock for a mere $1 million. That's a fucking STEAL!

The thing is, we hear stories all the time about CEOs getting golden parachutes in the form of bonuses and exorbitant severance packages from companies where they ended up driving the company to the point of bankruptcy. Why should tens of thousands of lower employees be fired so that one man can pocket $20 million as he simultaneously pushes the company near bankruptcy? It's not logical to reward such colossal failure. It would be like instituting the death penalty for all murders, unless you managed to kill at least 500 people, at which point you'd be granted a full pardon. It is completely asinine that we paid the men and women who instituted a global economic collapse hundreds of millions of dollars as if they were doing a good thing.

Exactly. When someone suggests "CEOs earn their millions", I usually think of Angelo Mozilo, who earned ~$470 million between 2001-06 driving Countrywide Financial into the ground. Or look at the heads of GM and Chrysler? How much did they make for steering their companies to the verge of bankruptcy? We could spend all day listing the clowns who took home tens of millions of dollars for making incredibly bad choices.

Attention Corporate America, I have an offer for you: Is your current CEO demanding too much compensation for wrecking your company? Hire me! I'll wreck your company for half as much!

 

[PokerGuy]

yet don't have any problem with CEO salaries.

This concept really isn't that hard to understand. Companies are free to hire whoever they think will lead them well, and they are free to pay them whatever they want. None of that impacts me, and if the products/services of that company become expensive as a result, I can choose to take my business elsewhere.

Conversely, if the gubmint messes things up, it messes them up for all the companies and I will have to pay more for the product/services no matter who I choose to do business with.

CEO salaries are a nice hotbutton topic, but lets face it, they have ZERO to do with the end price for consumers given the size of the companies. It's a drop in the ocean, and it has no impact on overall unemployment or the economy as a whole. It's a red herring.

 

[PokerGuy]

Exactly. When someone suggests "CEOs earn their millions", I usually think of Angelo Mozilo, who earned ~$470 million between 2001-06 driving Countrywide Financial into the ground.

Hire me! I'll wreck your company for half as much!

The company doesn't hire someone knowing that they'll fail. They sign someone thinking he's going to lead them to a bright future, and they pay for that potential.

Think of hiring CEO's like drafting an NFL player in the draft. The chargers drafted Ryan Leaf and payed him $50 million to have him suck terribly. The Raiders drafted Jamarcus Russel #1 overall and payed him $60 million only to have him do nothing but drink purple drank and be a terrible impersonation of a QB. Does it make sense to tell the chargers "hey, I could have been a terrible QB for much less!" ? No, it doesn't.

How much do you think hiring Steve Jobs was worth for Apple? Sometimes you get it right, and sometimes you don't. Either way, if someone has a strong track record as an executive or CEO, they're going to demand a lot of money and guarantees to come to your company, just like that #1 draft pick demands a lot of money to sign with your team. Whether they work out or not later doesn't change that fact.

 

[orbster556]

Considering they practically pick their own boards, yes. It's funny how libertarians and conservatives believe in meritocracy... except when it comes to CEO's.

I believe in free enterprise and free markets. If a company wants to contract with a person for services, I believe the parties ought to be able to strike whatever price they find mutually acceptable. If certain companies are frittering money away by making imprudent personnel decisions then there creates the opportunity for well-managed companies to become more efficient and, in turn, more profitable. Overpaying any personnel (whether it be high-level executives or mere employees) is an inefficiency that, at a fundamental level, is no different from a company using an outdated manufacturing process.

Going to your original post, captured boards and CEO-domination are legitimate corporate governance problems as it attenuates the ability of the board to reduce agency costs and might even encourage risk-taking. An equally important problem in the realm of risk-taking, however, is the influence of shareholders (especially institutional holders) (see, e.g., http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1397685). Whereas the agency problems engendered by the diverging interests of shareholders and management, respectively, are, by now, orthodoxy, the problem I highlight is only now emerging as field of study.

CEO pay has NOTHING to do with market forces. They are set by an network of interlocking board of directors who look out for the CEO's first and everyone else (including shareholders) get crumbs. The relationship between a CEO and the Board is anything BUT an arms length relationship.

The existing exchange rules, along with Sarbox, ensures that the compensation and audit committees be comprised entirely of independent directors. Moreover, NYSE exchange rules require a majority of the full board be independent. I don't know how much more regulation you can have while still remaining practical (i.e., monitoring executives to make sure they aren't fraternizing with BoDs). Of course, there are other proposed forms of regulation but such proposals would significantly intrude on the contract relationship between CEOs and the corporation and the corporations law as always viewed this as a private relationship.

Finally, if American shareholders were more quiescent -- in effect, more European -- I might find more merit in your argument for more drastic intervention/regulation. America, however, has a quite activist shareholding tradition and proxy contests are not uncommon. To be sure, there are imperfections with the existing state of affairs vis-a-vis proxy access and the like. My reluctance to whole-heartedly embrace reform, however, stems not only from my belief that corporations are private entities but, more importantly, from a belief that regulation has its own set of costs and, moreover, often carries with it undesirable unintended consequences (i.e., Sarbox).

 

[Macamus Prime]

Some of you swine fingermen need to wipe your mouths clean before you address the rest of us. The stench of human feces is quite distracting and we can't focus on trying to listen to your "points".

Jesus - how long have you been eating rich person shit so that you aren't throwing up once you are done guzzling their digested and passed through dinner from last night??

 

[Mursilis]

The company doesn't hire someone knowing that they'll fail.

But they continue to pay (and INCREASE the pay of) CEOs who have failed; why is that? Did you read the article? Amgen had declining share prices and was laying off 1000's, but still gave the CEO a 37% pay increase!!

Think of hiring CEO's like drafting an NFL player in the draft. The chargers drafted Ryan Leaf and payed him $50 million to have him suck terribly. The Raiders drafted Jamarcus Russel #1 overall and payed him $60 million only to have him do nothing but drink purple drank and be a terrible impersonation of a QB. Does it make sense to tell the chargers "hey, I could have been a terrible QB for much less!" ? No, it doesn't.

Again, see above. It's as if the Chargers, now knowing how awful Leaf was, gave him a 5-year extension worth 37% more!

How much do you think hiring Steve Jobs was worth for Apple? Sometimes you get it right, and sometimes you don't. Either way, if someone has a strong track record as an executive or CEO, they're going to demand a lot of money and guarantees to come to your company, just like that #1 draft pick demands a lot of money to sign with your team. Whether they work out or not later doesn't change that fact.

The difference between CEOs and QBs is that the owner of a sports team is usually one person (with the exception of the Packers), vs. the owners (shareholders) of a company numbering in the thousands. It's far easier for the owner of a sports team to negotiate the worth of a QB vs. shareholders acting together to exercise their rights to reign in executive pay. The free market is hindered in the latter situation.

 

[the DRIZZLE]

They're PRIVATE companies. If they want to make decisions for the short term benefit to traders & CEOs and sacrifice the company's long term well-being and those long term investors then that's their decision. They likely won't exist as a company in the long term as a result. Oh well, the rise and fall of companies has been going on for a long time.

Now if you want to nationalize those companies and have them run by the government, then you would have some say in things as a citizen. But as it is you may as well be crying that your dad gives your big brother the biggest allowance because he's his favorite.

Regulating corporate governance is a legitimate function of government. Do you think publicly traded companies shouldn't have to file reports with the SEC because they're private? Expecting that degree of self regulation isn't realistic.

 

[IndyColtsFan]

So? I guess all CEO's are evil and success must be punished.

How is the Amgen guy successful? Why did he do to deserve a 37% raise? Did you miss this part?

Shareholders at the company, one of the nation’s largest biotech firms, had lost 3 percent on their investment in 2010 and 7 percent over the past five years. The company had been forced to close or shrink plants, trimming the workforce from 20,100 to 17,400.

I'm all for CEOs (and frankly, ALL employees) reaping the rewards of a successful company, but all too often, companies tank and CEOs get paid big bucks while the guys who do the actual work get no raises or are laid off.

 

[IndyColtsFan]

That's because they think the more you can steal from shareholders the better CEO you are. They simply belong to the kleptocracy yet fail to understand why it's set up to be a kleptocracy.

CEO pay his HORRIBLE. It has far outstripped average worker pay over the past decades, becoming far out of whack.

That's right, and even discounting political angles, most of us are shareholders in these companies and should be outraged.

 

[IndyColtsFan]

how are you going to attract the best CEO's to run your company without offering comparable compensation?

Maybe I'm wrong, but I don't think most people have an issue with CEOs making big money as long as the company is doing well financially. However, when your earnings are tanking, stock is in the pits, you're laying off people left and right, and your remaining employees get little or no raises regardless of how well they perform, why does the CEO deserve more money?

And as I said in a previous post, don't think about this from a political perspective -- think of it as a shareholder because guess what? If you have a 401k, you are very likely a shareholder in some of these companies and it should make you angry.

 

[orbster556]

CEO pay his HORRIBLE. It has far outstripped average worker pay over the past decades, becoming far out of whack.

This fact, in and of itself, doesn't necessarily suggest any impropriety. Globalization has greatly increased the supply of workers -- especially for workers where high skill-level is not required -- which has driven down wage prices for regular employees. Conversely, changes in the capital markets along with globalization has made the job of a modern CEO much more complex and demanding than CEOs of the past. More complexity requires candidates who possess more intelligence/skills which, in turn, reduces the recruiting pool driving up the cost for getting a good CEO.

This is not to say that there might be other factors behind the divergence of executive and regular employee pay; indeed, there probably are. I do think it worth noting, however, that citation of pay disparity alone is probably not sufficient to buttress any meaningful proposition vis-a-vis the alleged failure of American corporate governance.

 

[Doc Savage Fan]

Captured boards are the problem imo...I've personally watched 2 large companies go bankrupt while the CEO's/COO's laughed all the way to the bank. That's bullshit.