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

[orbster556]

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?

I will not suggest that the existing corporate governance regime is perfect or free from imperfections. I would posit, in response to your quoted query, I might have two suggestions:

a) That the BoD, having analyzed their company's performance and compared with broader sector and economic trends, might think that the CEO has a done a good job mitigating the damage done to the corporation. There is always risk a company will fail and simply because a company does fail or goes through a rough patch does not mean that the CEO or other executives did a poor job.

b) Some of the payments may have been obligations that he company had already incurred when they initially signed the CEO or other executive. The BoD's decision to pay the CEO or award him some other type of compensation may not be so much a reward for the CEO as the company honoring it's pre-existing obligations.

 

[IndyColtsFan]

I will not suggest that the existing corporate governance regime is perfect or free from imperfections. I would posit, in response to your quoted query, I might have two suggestions:

a) That the BoD, having analyzed their company's performance and compared with broader sector and economic trends, might think that the CEO has a done a good job mitigating the damage done to the corporation. There is always risk a company will fail and simply because a company does fail or goes through a rough patch does not mean that the CEO or other executives did a poor job.

Nor does it mean that the employees did a poor job either, so what about raises for them?

b) Some of the payments may have been obligations that he company had already incurred when they initially signed the CEO or other executive. The BoD's decision to pay the CEO or award him some other type of compensation may not be so much a reward for the CEO as the company honoring it's pre-existing obligations.

Well, I think that's the point we're making here -- we know that is why these guys are getting this money regardless of performance and that is what is wrong.

 

[Atreus21]

That's not really relevant at all when the corporate boards are practically conspiring in unison to continually bump CEO pay higher than what they would naturally be if the boards had an arms length relationship with the CEO and actually looked out for shareholder interests first.

Sounds vaguely like unions, doesn't it?

 

[EagleKeeper]

Look at the percentage of CEO compensation to the value of the company.

One normally looks at the compensation according to their own pay.

It is a company owned by shareholders; the executive responsibility is to increase the value of the company.

IF the stock holders do not like what the CEO is doing - he is gone.
Same goes for the board of directors.


If what they are doing for the company is acceptable to the shareholders; they keep the job.

 

[fskimospy]

Look at the percentage of CEO compensation to the value of the company.

One normally looks at the compensation according to their own pay.

It is a company owned by shareholders; the executive responsibility is to increase the value of the company.

IF the stock holders do not like what the CEO is doing - he is gone.
Same goes for the board of directors.


If what they are doing for the company is acceptable to the shareholders; they keep the job.

You know that's not true for a huge percentage of corporations, right? The vast majority of shares in a company are nonvoting ones, and frequently the shareholders have exactly zero input into what the CEO is paid. The board of directors is frequently made up of people who are part of the same group as the CEO, not exactly dispassionate arbiters.

Sure shareholders could sell a stock if they wanted to protest a CEO's pay, but that's a pretty huge oversimplification. In practice, shareholders have almost no effective way of indicating acceptance or disapproval of CEO compensation.

 

[orbster556]

Nor does it mean that the employees did a poor job either, so what about raises for them?

As I alluded to in another post in the thread, there is greater pressure on retaining highly skilled executives than regular employees. Whereas there is a relative dearth of qualified managers, there is probably a glut of traditional employees.

This might not -- and probably doesn't -- entirely explain the divergent trend of management and employee pay. It is, however, a significant factor that shouldn't be overlooked.

 

[Nebor]

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??

All our lives. It's a bit like fine wine, you acquire a pallet for it over time and only the most discerning of aficionados can appreciate the finer waste. Ironically you can sometimes tell when your subject has been drinking fine wine.

I could really go for a nice 1940 Koch this evening.

 

[fskimospy]

All our lives. It's a bit like fine wine, you acquire a pallet for it over time and only the most discerning of aficionados can appreciate the finer waste. Ironically you can sometimes tell when your subject has been drinking fine wine.

I could really go for a nice 1940 Koch this evening.

????

Of human feces??? That's a shitload of shit.

 

[bfdd]

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??

Stop bitching about revolutionary thoughts and go be a revolutionary then pussy. You won't because you're a pussy. Just like Phokus, just like all the other idiots.

????

Of human feces??? That's a shitload of shit.

and that is quite the pallet

 

[ShawnD1]

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

One idea I always thought was interesting was the idea that the top guy in the company can only make 100x more per hour than the lowest guy. I think some little kid said this.

Lowest guy is $10/h. * 100 = $1000/hour for the highest guy. If he wants to give himself a raise, he also needs to give the lowest people a slight raise.

 

[mchammer187]

I definitely agree that CEO's pay needs to be adjusted but I don't really think artificial limits are the answer. I think something like what Apple did with Tim Cook is much better. Shares that must be held long term in order to be vested so that if you tank the company your fortune tanks along with it.


I do find it funny that most of those that defend CEO pay will continue to attack private labor union practices (UAW Boeing). To me they are one in the same and both need to be addressed

 

[Nebor]

????

Of human feces??? That's a shitload of shit.

I just can't get enough!

Also it's cheaper in bulk.

 

[Spikesoldier]

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.

it would seriously need a government regulation to change CEO pay.

they are offered unconditional payouts, even when the company hits the shitter. unfortunately this is the norm. if the CEO is going to invest a lot of hours into the company, then they want a guaranteed payout. again, it would take all the companies employing CEOs to stop guaranteeing payouts when failing to stop this trend. ala regulation.

but from the CEO's shoes - the risk for investing all those hours with a possibility of that effort being fruitless due to failure is a large risk. Suddenly you found out you lost X years of your life and stressing that whole time.

you can understand why they want the payout or the golden parachute. its just that the corporations are offering bigger and bigger ones to attract the best people in hopes they are competent and turns into results for the company. obviously, it has been hit or miss.

but heres the problem, slap a regulation on CEO pay, the good CEOs go to work for the foreign international firms.

 

[Phokus]

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.

Guess how much Jamarcus Russel and Ryan Leaf received as compensation when they were cut by their teams? Guess how much CEO's get when they're fired and their Golden Parachutes kick in? Your analogy is terrible and you're a frigging moron.

 

[ShawnD1]

but heres the problem, slap a regulation on CEO pay, the good CEOs go to work for the foreign international firms.

And that's bad because.....?

Right now "good" American CEOs are competing to see who can build the most factories in China.

 

[DrPizza]

And, in other news, the sky is blue, and water is wet.

 

[rchiu]

Guess how much Jamarcus Russel and Ryan Leaf received as compensation when they were cut by their teams? Guess how much CEO's get when they're fired and their Golden Parachutes kick in? Your analogy is terrible and you're a frigging moron.

For all the financial knowledge you claimed to have, do you seriously not see the problem in your argument? Golden Parachutes are part of the contract CEO and the company negotiated as part of the package from the very beginning. It was not decided after CEO are fired. It's industry norm to have golden parachutes at C-level.

NFL just happen to not have golden parachute type of contract clause. If they do, and everyone have them, Russel and Leaf would have them too.

The guy's post you reply to still remains valid. No company is going to say they hire a loser to lead their company. Hence the above average peer benchmark and the package.

But hey, I am sure you know all about hiring a C level guy to run a big company. And how having a below industry average price tag and no golden parachute is gonna land you anyone good. And how anyone you low balled to land is gonna have credibility to lead and command other macho c-level type a personality.

 

[rchiu]

Capitalism needs regulation. Good corporate governance is essential to having a strong dynamic economy. If you want to see a good example of why look at Gazprom. Based on its reserves it should be worth over $1 trillion, yet the market cap is only pennies on the dollar. The reason why is Russia's terrible corporate governance. To put it more directly good corporate governance increases economic efficiency.

Why can't you let bad CEO and bad board hiring those bad CEO run the company to the ground themselves, instead of slapping more regulation, more bureaucracy for good companies that do thing the right way?

Gazprom is a perfect example of how free market work. Let the market tell you if you have good or bad corporate governance instead of bunch of politicians coming up with the laws and regulation and force it on everyone.

Again, I am not under the illusion that all CEO/Board are perfectly honest man. All I am saying is let market/shareholder decide. Those who have no vested interest? butt off.

 

[Phokus]

For all the financial knowledge you claimed to have, do you seriously not see the problem in your argument? Golden Parachutes are part of the contract CEO and the company negotiated as part of the package from the very beginning. It was not decided after CEO are fired. It's industry norm to have golden parachutes at C-level.

NFL just happen to not have golden parachute type of contract clause. If they do, and everyone have them, Russel and Leaf would have them too.

The guy's post you reply to still remains valid. No company is going to say they hire a loser to lead their company. Hence the above average peer benchmark and the package.

But hey, I am sure you know all about hiring a C level guy to run a big company. And how having a below industry average price tag and no golden parachute is gonna land you anyone good. And how anyone you low balled to land is gonna have credibility to lead and command other macho c-level type a personality.

That speaks to the fact that the NFL compensation makes sense while executive compensation makes NO fucking sense, you god damned moron. Guess what, if the NFL players had the same kind of influence with the owners of their teams like CEO's do with the boards of directors (who OSTENSIBLY are supposed to represent the owners of the company), they, too, would get 'golden parachutes'. Unlike boards of directors, the owners of the NFL were intensely hostile to the players during the labor negotiations. NFL contracts actually do a MUCH better job on rewarding performance than CEO contracts do (and guess what, they have a cap on how much they can actually make as a group, due to the salary cap)... and these guys have the risk of their careers cut short by freak injuries and the quality of life for many of them is surely worse than your average citizens, considering the hits they take. If a football player does a shit job, he gets cut without a golden parachute, and if his performance/attitude was bad enough, he's out of the league permanently. A lot of these CEO's that run their companies into the ground get saved by the network of BOD's that will find him another job somewhere else, regardless of their shit performance.

 

[Phokus]

Why can't you let bad CEO and bad board hiring those bad CEO run the company to the ground themselves, instead of slapping more regulation, more bureaucracy for good companies that do thing the right way?

Gazprom is a perfect example of how free market work. Let the market tell you if you have good or bad corporate governance instead of bunch of politicians coming up with the laws and regulation and force it on everyone.

Again, I am not under the illusion that all CEO/Board are perfectly honest man. All I am saying is let market/shareholder decide. Those who have no vested interest? butt off.

We all have a vested interest you fucking idiot, if the majority of boards give bad contracts that reward bad incentives, workers get hurt. [edit: Not to mention our 401k's/IRA's]

 

[rchiu]

We all have a vested interest you fucking idiot, if the majority of boards give bad contracts that reward bad incentives, workers get hurt. [edit: Not to mention our 401k's/IRA's]

So again prove majority of boards give bad contract. Again you can't. Existing American system produce better result compared to EU or other developed countries. There are more successful companies in America then anywhere in the world.

That's the fact.

 

[senseamp]

Job creators.

 

[Generator]

More like wealth destroyers...

The number one issue facing this country is greed and the wealth disparity that comes from it. Workers need to learn two very important words. Maximum wage. That is what the CEO gets at the price of everybody else and the company as well.

The question is being asked is "how does that affect me, the consumer?" Well do you fucking work for one of these job destroying CEOs? I don't know how you people think the shit you buy get on the shelves, but it certainly has very little to do with overpaid CEOs.

The Greed Game as I see it is over. The slave labor who've allowed their benefits, healthcare, wage, foam cups and dignity to be taken. The CEO has extracted the very last drops of blood that flow through a company. Multiply that by every other greedy fuck out there and you're left with what we call a economy. One that is depressed.

When you really start to think about the greed in a vast manner. You almost get the impression that the vampires of all facets know the game is up. This is the titanic folks and greed is the iceberg. Extract, extract, extract! I've already told you people to get yours while you can! Fuck over anyone who gets in your way. This is the game for now, the good thing its about to fall apart.

When the time comes the serfs will be dignities biggest enemy. Have no mercy.

 

[IndyColtsFan]

it would seriously need a government regulation to change CEO pay.

they are offered unconditional payouts, even when the company hits the shitter. unfortunately this is the norm. if the CEO is going to invest a lot of hours into the company, then they want a guaranteed payout. again, it would take all the companies employing CEOs to stop guaranteeing payouts when failing to stop this trend. ala regulation.

but from the CEO's shoes - the risk for investing all those hours with a possibility of that effort being fruitless due to failure is a large risk. Suddenly you found out you lost X years of your life and stressing that whole time.

you can understand why they want the payout or the golden parachute. its just that the corporations are offering bigger and bigger ones to attract the best people in hopes they are competent and turns into results for the company. obviously, it has been hit or miss.

but heres the problem, slap a regulation on CEO pay, the good CEOs go to work for the foreign international firms.

I don't know what the answer is, but I do know that I'm tired of hearing "They'll run to other countries/companies if we don't pay them at the very top of the scale!!!" So? That applies to just about any position and as we've seen recently (see: HP), people are being hired to the CEO position (see: Leo Apotheker) who have NO track record of success or have previous records of failure (see: Leo at SAP). These guys seem to be recycled at an alarming rate and I won't be surprised if he turns up as CEO elsewhere. These guys do not have some magical abilities that some here would have you believe -- very few (Jobs, Gates) are of that caliber.


As Phokus (I think it was him) mentioned earlier, it has become more of a buddy system at the top than anything else. Seriously, I *laughed out loud* when they hired Leo Apotheker (ask my friend at HP, who I chided about it) and saw this disaster coming over a year ago. Obviously, I must be smarter than the idiots on the HP board. Hiring their pal didn't help them a bit, did it?

I'm not a CEO and never have been, but I can guarantee one thing -- I could not possibly have done any worse than Leo. Guaranteed.

 

[WHAMPOM]

1) Its not a problem
2) If it is so easy to be a CEO of a major company why arent you one?

Q:Large flightless bird, head, hole? Aatranus!!