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Worst Tech CEOs Earn the Most Money
tappytibbins writes to tell us Baseline is reporting that in a recent look at the 100 largest tech companies they found that there was a striking correlation between the highest paid CEOs and the lowest returns. From the article: "The one-third highest performing companies paid their chief executives an average of $7.12 million--while the bottom third paid their CEOs $9.29 million. The study compared direct compensation, which includes base salary, bonus and value of stock grants. Why the disconnect? Jack Dolmat-Connell, founder and president of the firm, cites the phenomenon of 'chasing the median': Companies benchmark their executive compensation figures on peers instead of looking at factors related to performance."
Why the disconnect? Jack Dolmat-Connell, founder and president of the firm, cites the phenomenon of 'chasing the median': Companies benchmark their executive compensation figures on peers instead of looking at factors related to performance.
How about the former CIO where I worked? You could swear his primary motivation was to get himself more money, however he did it, by making his performance look good, the long-term problem is determining if that appearance of 'good performance' really was as good as it looked on paper and how it enabled the business the grow or trim costs effectively.
"If I make all those guys putting in 16 hour days wear suits and ties, we'll look more professional and I'll get compliments on what a tight ship I run! That should get me $100,000 more per year."
A feeling of having made the same mistake before: Deja Foobar
Their CEOs made a lot of money while their companies went down the drain.
Insert witty sig here.
We had a guy who took a job, changed the numbers on a report to show his predecessor sucked, and then faked his numbers to look good.
Since none of the management ever checked the chart, they didn't realize the real numbers were lower than the last guy. Since they didn't check the numbers, they gave him a huge raise.
Nice.
My mom says I'm cool.
It could be that those companies that are run by those who undervalue their workers and and mismanage the companies towards the top are doomed to failure.
Or those companies whose management is there for love of the business tend to do better.
Or a company desperately in need of help is likely to dump huge sums of money on acquiring the most expensive CEO they can, in the hope of a turnaround.
The ______ Agenda
"Companies benchmark their executive compensation figures on peers instead of looking at factors related to performance."
Isn't that how most pay is determined? By what others are paid in your profession/industry?
Do your own DD and stop bitching about CEO pay.
I remember a business book from the 90s, "Built to Last", that also noted that companies with higher paid executives performed worse.
Does anybody else ever find it weird how many people seem to persistently believe that the free market will function best if we all just look the other way and don't talk about it?
Maybe the companies that are in a bad position are willing to pay more to get a good CEO. But just hiring a 'good' CEO won't put the company in a good position.
Or perhaps the companies doing poorly have only recently hired the "better" CEOs who command higher salaries to help dig them out of the hole.
I'd like to see executive compensation tracked across executives (not companies!) over time in a fixed-effects regression. Then we would know conclusively whether CEOs were being rewarded for poor performance or not, and it would be as easy to do as the cited study.
My Tech company isn't making anything. $0 returns. I think that means I should be getting paid WAAAAY more than all these guys. I wonder who I talk to about that..
I generally agree that top level execs are paid too much.
However, regardless of that opinion, there's an easy explanation for the results the article found: given a top-notch CEO who gets a job offer from a well-performing company as well as an underperforming company, which company do you think would have to pay more to get his services?
Clearly, companies that are in need of a turnaround and repair are going to have to pay more to get equivelent talent. Not only is the work harder, but the prospect of failure and termination are much higher. It's a greater risk, and therefore the market will make it more expensive.
So there are a couple of valid interpretations of this data, and the article (wisely, probably) makes no attempt to jump from correltation to causation. Too bad so many people -- even slashdotters -- have such a hard time resisting the instinct to see the two as being the same.
-b
If I wanted a sig I would have filled in that stupid box.
We all know that.
It's just that apparently, if you don't pay peanuts, you get expensive monkeys.
HP.
I wonder where Carly was on that list.
Fascism starts when the efficiency of the government becomes more important than the rights of the people.
Just like in the stock market, higher risk means higher potential upside. If you go to a company that has poor performance, and performance doesn't improve, you will be blamed. Thus, the higher compensation for the higher risk.
Note I'm not saying anything about the ridiculously high salaries paid to CxO's in general...
posted as AC because I forgot my password
If correlation==cause, does that mean Steve Jobs (current salary: $1) would head a list of the world's best CEOs?
This applies to CEOs, CIOs, etc. An impressive resume, huge compensation package and celebrity status does not mean you will be a great executive. Sunbeam, Tyco, Enron, WorldCom, etc have all fallen victim to this. Many companies these days are falling into the rock star CEO trap, or CIO in this case, and that's doesn't guarantee success. Read the book Good to Great - Jim Collins analyzes this myth about celebrity CEOs, compensation and returns.
There is a problem with this study: it measures shareholder return as a percentage, but compensation as a dollar value. If a CEO grows a $10B company by 1%, he generates $100M for shareholders. If a CEO grows a $100M company by 10%, he generates only $10M for shareholders. The study implies that the second CEO deserves to be paid more, because his company had a larger percentage return. But one could certainly make a good argument that the first CEO deserves to be paid more, because he generated a larger absolute return to shareholders.
In fact, given the general trend that smaller companies tend to grow faster than large onces, you would expect the data to look like this even if there is no intrinsic correlation between CEO pay and corporate performance.
I don't write this because I believe that the market for CEO pay works. I write this only because this particular study doesn't prove that the market for CEO pay doesn't work.
Hell yeah.
Where can I sign up to be a CEO?
I'll be the worst CEO you can imagine.
If a company is doing that bad, then a lot of other factors are at play. A board of directors that don't know enough to oust the CEO. Inefective CIO's, CFO's COO's all add up to a ship with no rudder.
In Soviet Russia, Nigel makes plans for you!
CEOs of companies whose stock price is rising are happy with their stock options, and don't care whether their salary is $1 or $1000000. Of those, the smart ones opt for the low salary because it's good for employee and shareholder morale.
these guys saleries and buyout packages mean they'll never have to work again. They're not taking any real risks. When it comes right down to it, they're the ruling class. Succeed or fail, it doesn't matter to them, they'll aways be ok.
Hi! I make Firefox Plug-ins. Check 'em out @ https://addons.mozilla.org/en-US/firefox/addon/youtube-mp3-podcaster/
Despite the overall inverse correlation of pay to performance in the tech sector, Dolmat-Connell notes that year-over-year, in CEO compensation of the highest-performing group of tech companies increased in 2005--up 15.7% versus the year prior--while that of the chief execs of the bottom-performing companies declined 12.0%.
I didn't see any data linked from that article. Without the numbers and raw data, it's hard to say wtf if anything this article actually means (though it should be entertaining to watch the anti-capitalists vent on this).
1. It's not just tech - the overpayment of CEOs has no correlation (or negative if any) with performance at most US firms.
.a. vote not to overpay senior execs (the only vote is whether or not the amount in cash for strict salary over $1 million is TAX DEDUCTIBLE for the firm, the shareowners don't get to vote down the paypacket, under our form of red capitalism in the USA); .b. vote out board members - most board members need only receive one (1) vote to be reelected - and most have a few thousand shares they were given free or at reduced rate as options and thus there is no check on them; .c. identify the votes of board members on compensation committees so that the shareowners can vote out the actual compensation committee members who rewarded incompetence with even larger pay packets - in most cases the committee decision is reported as if it were unanimous, even if it isn't. additionally, the CEO usually picks the members of the committee and the board in the first place - shareowners don't get to do that.
2. The major problem is that shareowners - that is to say, the capitalists - are even less able to correct excesses of tech firms, as more shares of such firms have been looted - um, pardon me, given as stock options - to the senior execs and CEO/CFO/COO and thus have even fewer checks on such overpaid employees.
3. Many people fail to understand that most US firms do not permit shareowners to:
-- Tigger warning: This post may contain tiggers! --
Yeah, it was nice. Anyways I jumped ship a year later; I got a new offer with even better pay. I love money.
CEO's have a hand in approving their own wages, so the worst ones bein only after the money, take a bigger cut for themselves.
The CEO of my old company gambled (and lost) our salaries at Vegas and on stocks and when he decided his salary wasn't enough he created a money funnel^H^H^H^H^Hconsulting company of which he was one of two employees and charged our company for consulting alongside his salary. When all this was uncovered he simply skipped town. He seems to have done this all his life. When he was caught running a mutual fund scam a few years back he got a little slap on the wrist and was banned from trading on certain markets. And he was the nice guy compared to the sleazebag who took over from him (especially when he was buying the drinks). These people just jump from job to job wearing teflon coated suits to which nothing sticks.
Doesn't it make you feel good to know that our freedoms are protected by politicans, lawyers and journalists.
it's all about da money! Pure and simple, how much stock did Google's founders sold? who care if you sold million per day and only get pay $1 salary.
If you toss cash at them, what incentive do they have? Think of it like this. If you started out a college grad at $100K+ instead of making them work their way toward that, why should they care about the first few years of work? As long as they keep their job, they're making A LOT of money from their point of view. Bottom line is... there's no hurdle from them to triumph over, thus no reason to get down in the trenches and build the company.
Where is this list of 100 companies? I couldn't find it. Did they leave it out to save space or something?
If you must moderate, please moderate as irrelevent, not something bad, because I'm sure someone will find this interest
That's the problem with pay-for-performance - it invites abuse. Whatever arbitrary benchmarks you set for the CEO/CIO/everyday employee, there will be the temptation to work to the benchmarks and ignore the longterm best interests of the company. Taken to it's extreme, you get an Enron or WorldCom, where executives spent most of their time making the books reflect performance that would enhance their stock options.
Don't forget that Friday is Hawaiian shirt day.
Performance has little to do with it.
Engineering is the art of compromise.
18 months on average. Gotta grab all you can while you can, I guess.
"I'd rather be a lightning rod than a seismometer." -Ken Kesey
I think this is a good illustration of the free market operating to transfer money and power from the many to the few. I believe in renumeration comensurate with performance, but to argue that a CEO is 1000x (number pulled from ass) more valuable to a company than it's employees on the ground is just ludicrous. The management skills required to run companies are not as rare as the salaries of these people would indicate - especially when one considers the pathetic (and oftentimes illegal) way in which these companies are commonly run.
Thus we have an example of the wealth of the many being transfered to the few (in a manner not based on merit, but rather, groupthink), and why a _totally_ free market is a terrible thing, and not in the interests of the majority.
Darl
"these guys saleries and buyout packages mean they'll never have to work again. "
In true slashdot "absolutism", you *assume* those contracts can't be contested, let alone reworked.
A simple way to slow down inflation of CEO compensation would be to limit them to serving on one board of directors at a time. The norm today is for CEOs to be on the board of multiple companies. So there's a great motivation and ability to use their power to maintain or raise CEO compensation in general and consequently their own specifically.
One of the worst aspects of the governance of publicly held American companies is excessive, non-competative compansation of corporate officers. It grew to an extreme in the dot com bust of 2000. Many elements of corporate governance since been improved. For example with Sarbanes-Oxley it is more difficult to manipulate earnings. But the process by which corporate directors are elected and CXO's are paid lacks transparency. Conflicts of interest and cronyism abound. Small shareholders have little real recourse. For corporations that seek efficiency for maximum rate of return for shareholders, curbing excessive compensation is easy money.
an ill wind that blows no good
In defense of Enron, before the debacle of the late 90's, they were a rock solid company. They pioneered new strategies in the energy market. I think Ken Lay was really a genius. similarly, I've heard Hitler might be the greatest orator of the last century. Being good at something != being moral.
Granted, I've never heard much about the genius of the management team at the other companies. But I do step to the defense of Enron when it was a legitimate business. And oddly enough, Ken Lay supposedly had a lot to do with Enron's strategic direction back then.
"...did you just say that the company isn't loosing money fast enough?" ...
"Dilbert, will you stop embarrassing yourself, if you read Dogbert's book you would know that a fast growing company always looses money while it's expanding"
"were not a fast growing company!"
"and we never will be if we don't loose more money!"
Is this even news? Palmisano has no idea what he's doing. He's sold half the company, the stock keeps getting worse and worse. Now the regular employees have no benefits and the only people being hired are contractors. Yet he's doing just fine. Why do people put up with this sh1t?
||| I still can't believe Parkay's not butter.
You can have all the passion you want as long as it doesn't hurt the CEO's stock options.
For anyone wanting more details, DolmatConnell's website has a link to their study (PDF): http://www.dolmatconnell.com/resources/2006DCPTech 100Study.pdf
These companies need to forget it, they are never gonna be Commodore... OK? ;)
The way folks become CEOs is to work their way up the corp food chain. Unfortunately, what makes a good middle manager, technician, etc.. (attention to detail, knowing how to do the job, nuts and bolts type of stuff) makes a really shitty CEO. A CEO has to be a big picture type of guy - like Steve Jobs. Here's the catch-22, to become CEO, at least for your typical publicly traded corp, you have to work your way up the food chain. To do that, you have to be a great nuts and bolts guy to become a shitty big picture guy.
So what's a big picture guy supposed to do?
Become an entrepreneur - Steve Jobs, Mark Cuban, Hewlett and Packard, etcc...
OR, get into a program like the one that IBM used to/still does have. They called the big picture guys "Wild Ducks", IIRC and they would work with them and try to groom them for something bigger. Of course, there's only so many CEO jobs out there. Which leads most of us to option #1.
Which means, someone like me, who hates the details, is usually considered a fuck up by the corporate world and techies and, well, everyone else. Hence the few years of my unemployment.
Yeah, try getting funding for a startup if you don't have a track record and/or you didn't graduate from Stanford, MIT, Harvard, Yale, you get my drift.
Well, I should RTFA -- this is a snap comment based on the summary.
It reminds me of my occasional impression that at least portions of (U.S., at least) society are becoming an "entitlement" society. If you have the right background, you're effectively entitled to certain compensation. Fancy degree, prior "experience" in the right kinds of roles.
Back in olden days, it might have been a formal family title. But with the increasingly disparate prices of various "classes" of education, the elimination of the so-called "death tax", and the like, family assets are certainly an element of the equation.
Ivy League degree. Connections to secure "fast track" positions. Moving on before the damage catches up.
Actually, many who might fit this description may well be competent. But I also see signs of the scenario I describe. Reminds me of a previous job, and the rotating executives at the company who seemed to be staying in position just long enough to gain a step onto the next rung of whatever ladder.
You're absolutely correct that the article summary is somewhat statistically (and economically) illiterate. Instead of "Worst Tech CEOs Earn the Most Money," why not "Struggling Companies Pay CEOs Top Dollar to Turn Things Around"?
... like people who complain that "The Man" is keeping them down.
So there are a couple of valid interpretations of this data, and the article (wisely, probably) makes no attempt to jump from correltation to causation. Too bad so many people -- even slashdotters -- have such a hard time resisting the instinct to see the two as being the same.
Unfortunately, I don't think this is a coincidence. There's no way Slashdotters would have so grossly misinterpreted a study correlating, say, video games and violence -- because the party line around here is that video games are a Good Thing. A lot of geeks, however, have complete disdain for the "suits" and "pointy haired bosses" in management. "Why do the 'clueless' managers make so much money, when I'm obviously so much smarter? Why do I have less job security when I'm the one working 100 hour weeks, fueled by Mountain Dew and fear of downsizing?" It's true that there are bad managers out there, but much of this attitude is just scapegoating for one's own job dissatisfaction
It also shows a profound misunderstanding of business. To the disgruntled coder, it may seem like the business world is stupid and arbitrary -- where people make more money the "dumber" they are -- because they don't understand it. But really, it's little different than if the CEO said: "I don't understand your C++ code; it just looks like a bunch of random characters you threw together. Therefore, it's stupid." Like it or not, there is such a thing as skill in business -- and oftentimes, it's rarer and less replaceable than technical skill. Just take a look at the career of Steve Wozniak, with and without Steve Jobs. Now look at the career of Steve Jobs, with and without Steve Wozniak.
Cheers,
IT
Power corrupts. PowerPoint corrupts absolutely.
So what you're saying is that Darl McBride has a salary of infinity?
The "direct compensation only" analysis is useless. Smarter execs will take less cash out of operations they're spending to improve company profit. And take more in equity or even perks that the corporation has to deliver anyway as part of its core business. Like free rent at a hotel chain.
Ignoring the complete package is just another way for business analysts to look like they've got "unique vision" when finding a counterintuitive economic, especially at tech companies that few people believe they can understand, anyway.
--
make install -not war
If a CEO can persuade investors to accept lower returns the CEO is doing his job and shoul dbe paid more. Or to put it another way, the investors must be persuaded the companies future value will be higher if they are willing to invest in a low return comapny. Thus they must have confidence in the CEO. This happens a lot in companies with high P/E ratios. Look at steve Jobs.
Some drink at the fountain of knowledge. Others just gargle.
The total compensation (including fringe benefits) for each of the top five employees of a publicly held company has to be reported to the SEC.
The shareholders should set that amount. You put a number on the proxy, and the share-weighted median of those values is the limit on total compensation for the top five. Management should be allowed to suggest an amount on the proxy, but that shouldn't be the default for unreturned votes.
Now that would make management more responsive.
For mutual funds and retirement plans, the right to set that value has to pass through to the beneficial owners. For a mutual fund, you'd specify a number on the fund's proxy, and the fund's managers would be allowed to specify the compensation limit for each company, but those choices would have to add up in some weighted way to the median of the value set by the real owners, the fundholders.
folks, greed is the consistent, underlying theme throughout humanity. is it shocking that those in power make a power / money grab?
people, that's not news... that's olds... that has been going on since mankind first displayed an ego.
i'd argue that it would be shocking news if ceos gave one years bonuses to to the people who support him / her and make their position possible... out of gratitude.
*SHOCKING*, i tell you.
tell me, how many slashdotters have worked for a company where the executives kicked down a significant portion of their compensation out of appreciation for their employees? just once. i'm not even talking every other year or every year. just once.
My tech company just got rid of the highly paid dickhead of a CEO, and the guy who founded the company is back at the reins. The damage is massive, and will take us some time to recover, but we all think that happy days are here again.
Correlation/causation yet again. Perhaps failing companies have to pay more to get CEOs to try turnarounds than healthy ones? And just maybe those companies are so crappy, that they can't be turned around?
Figuring that leaves me with $3 million to work with...that should get me two university professors, two hot-shot MBA grads, two accountants, two lawyers, two scientists/engineers in the relevant business, a doctor just for balance, four secretaries - and a cool half million for me.
I am sure that together we can make just as good of decisions as your precious CEO.
Actually, I think the problem here is the Lake Wobegon Effect - no company is will to admit that it would dare hire a below average CEO. Therefore, of course theirs deserves pay greater than the average...
That is often the case with tech startups. The founders are the CEO's and if the company becomes successful, moves on to Chairman and relegates the day-to-day basis to a hired gun - or more likely a closely held associate.
In the Old Boys Network, sure, a lot is who you know, but you still have to go through the motions and jump through the hoops.
Let's see, that's four cliches in once sentence!
This issue is a bit more complicated than you think.
No, I didn't RTFA, but I was just wondering if floundering companies made bad deals trying to fix their troubles.
This issue is a bit more complicated than you think.
... working for me absolutely who insisted that the great performance of the highest-paid football players was due to their salaries.
I will create a sig when innovation restarts in the U.S.
In fact, Google is so big that those two data points might invert the entire curve ...
I will create a sig when innovation restarts in the U.S.
1. Create a multi billion dollar company really fast
2. Add extra hype
3. Become the worst CEO ever
4. ???
5. Profit!!!
need a better Guide? think about all the stock spam in your inbox, then grow that idea by a factor of 10000
That's bullshit -- you cannot measure the performance of a CEO at a large company.
Is Jobs purely responsible for the success of Apple with iPod? Hell no! First you have the people that designed it, then the people who made the ad blitz, as well as the people who negotiated the production contracts, etc.
There are so many people toiling at a large company, and this focus-on-the-CEO mantra that seems to be plaguing everyone is only fueling their rising salaries.
Do you really think that Exxon's ex-CEO deserved a $435 retirement package? That's almost 2% of their last years profits ($27 billion, as far as I remember). With all the compensation these people get there is no need to give them a retirement package.
Here's how to get paid like a CEO: 1) Get yourself an agent. 2) Put yourself in the public by getting a few articles in a trade magazine. Better yet, get on CNBC or Marketwatch. 3) Have a lawyer and your agent negotiate your... 4) Contract. If you have professionals negotiate your salary for you, you will get more money.
Think about your current job. If you are like most of us in the USA, you were offered a position, then they told you how much it paid, and after a few days on the job, you found out what you'd be doing. All of this was decided by a professional human resources person. Hopefully they had some idea what you are worth (doubtful), and if your skills matched up with the position (unlikely, but you're flexable). Most people really don't know how to barter in the US. Part of HR's job is to make you feel like they are doing you a favor by "giving" you a job, so you'll be happy right off the bat. And since most HR folks are shielded from the work, they have to fall back to personalities (which weigh huge), training (which is useless in most positions, white or blue), and how soon you can be available (so they can stop dealing with filling this opening).
"Well, good luck finding a judge that doesn't run a bestiality site."
It also shows a profound misunderstanding of business.
I disagree. I think it shows a solid understanding of business. In almost all businesses, poor performance gets you a boot in the ass and a trip to Monster.com. In the small percentage of businesses that have large numbers of employees, sometimes poor performance leads to termination, but many times it does not. I've worked in large businesses, government agencies, and small businesses. I've started and managed my own business. Large businesses, in my experience, behave essentially like government bureaucracies. Movement up the ladder is more rapid in large companies than in government bureaucracies, but in neither case do managers carry risk even remotely approaching that borne by managers in small businesses.
There are very important business skills, but I'm not sure that excellent managers are any more rare than excellent programmers. I've seen enough managers to know that most of them are mediocre at best, because in American businesses managers are seldom given truly useful leadership training. MBA programs certainly do not train leaders. The Cult of the MBA is in my opinion one of the worst things to hit American business, because it encourages in-group behavior that leads to debacles like the Enron and WorldCom scandals. Where does the Cult of the MBA reign supreme? Why, in big business, of course. In small businesses, the sheepskin doesn't matter. Results matter.
Read the EFF's Fair Use FAQ
>I am sure that together we can make just as good of decisions as your precious CEO.
If you actually got to play in that park, you might just discover you are wrong.
There's another side to understanding the business world, and you might find that it's NOT just a bunch of overpaid incompetent boobs playing it by ear.
Are you willing to put all your assets into a trust for the company, as compensation if your plan fails? How much of your own money are you willing to invest into preferred stock in order to acquire the kind of vested interest that comes with a C-level executive position?
-fb Everything not expressly forbidden is now mandatory.
I'll bet I can be a far worse CEO than you, and I'll do it for only twice the money!
Boundless Expansion, Self-Transformation, Dynamic Optimism, Intelligent Technology, Spontaneous Order- BEST DO IT SO!
In addition to the whole poor-performing companies pay more to retain/hire CEOs...
This uses the "value of stock grants", which I assume to be a Black-Scholes calculation on the estimated value of stock grants. This calculation is based on number of options, stock volatility, terms, and some other factors. Bottom-line: Black-Scholes gives higher values to stocks with higher volatility. Poor-performing companies generally have a higher volatility and thus the option grants have a higher value per option.
These companies are all run by the same folks. The board of directorys for one company is the CEO of another. By paying the CEO 9 million, you have a "safty net" when the company fails (i.e. when the company doesn't get bought out or IPO as planned, the CEO will take his money and start a new company and employ the guy who just finished employing him).
It's a strategy to keep the ball rolling as long as possible until one of them gets lucky.
just may be some of these CEO are mentally ill. Narcissist and psycopath as CEO's. http://www.fastcompany.com/magazine/96/open_boss.h tml
The purpose of writing is to inflate weak ideas, obscure poor reasoning, and inhibit clarity....Calvin
There is a problem with this study: it measures shareholder return as a percentage, but compensation as a dollar value. If a CEO grows a $10B company by 1%, he generates $100M for shareholders. If a CEO grows a $100M company by 10%, he generates only $10M for shareholders. The study implies that the second CEO deserves to be paid more, because his company had a larger percentage return. But one could certainly make a good argument that the first CEO deserves to be paid more, because he generated a larger absolute return to shareholders.
Only if there are the same number of shareholders for the 100M company as the 10B company, which is hardly likely. If the larger company is 100 times bigger than the smaller one, there are probably 100 times as many investors as well.
So lets say each investor at each company has $1,000,000 worth in stock. The investor in the smaller company gains $100,000 as a return but the investor in the larger company gets only $10,000. So why does the CEO deserve a raise again?
It makes perfect sense that the best paid executives are the worst performers. The whole process of selecting people to be on the board that sets your salary is filled with conflicts of interest. Your salary as a CEO negatively correlates with your integrity. Your integrity positively correlates with your skill, and with how well those under you work for the good of the company with you as their example.
Those of you who discount this study, look around at the real world a bit before you do it. This study makes a lot of sense. Now how to fix it, that is the problem for us as a society....
The real problem is that shareholders have very little incentive for their company to do well in the long term. If a shareholder makes their quarterly chunk of change and bails before the company goes bad, that's okay with them. Thus, CEOs are paid to be short-sighted. Ultimately these CEOs become glorified fund managers. CEOs are hardly leaders of men.
What do you mean my sig is repetitive? What do you mean my sig is repetitive? What do you mean....
So how exactly do this bunch of arrogant, ivory-tower super-egos, used to having everything their own way, none of whom have any experience actually running a company, actually agree on any decisions?
With endless argument and by allowing people with specialization in their various feilds some level of control in those areas. It's not really any worse of a plan than hiring one arrogant, ivory-tower super ego, used to having everything his own way, who may have no experience actually running a company, to be given complete control to be an absolutly unchecked arrogant, ivory-tower super ego, who does get everything his own way. If nothing else you can put them to work answering phones and save money on an office staff.
I vote down any board member at Nortel (where I have shares/used to work) who has more than four board positions. I was going to pick three, but that way there were no board members.
They say that it is a difficuly job, but some of these people have 10 jobs at that level. How can a job they can spend a half-day a week on be difficult? And it also means that "incentifying" by shares to make them want the company do well is irrelevent: they have 9 other companies to help them out if one goes titsup.
Recent moves from shareholders have included removing shares as incentive. The board recommended this be refused of course. It was voted down, and has reapppeared in a slightly reworded fashion. Hopefully this will continue until voted in (by accident, if nothing else).
The idea that they are buccaneering entrepreneurs, risking it all on their performance is just laughable. They just risk doing their job badly and getting fired...before moving onto the next feed trough.
One potential problem as ichin4 points out (http://slashdot.org/comments.pl?sid=191520&cid=15 740518) is that the dependent variable here is percent return to shareholders. One can arguably make the case that absolute return is more important when determining compensation. Whatever one thinks, if the study were worth anything at all it would at least provide an analysis of both (perhaps arguing that one is better) to allow the readers to make some sort of informed judgements.
Of course, the above issue may not have been an issue at all if the authors had used reasonable statistical techniques. You can read the actual study yourself at http://www.dolmatconnell.com/resources/2006DCPTech 100Study.pdf. The upshot is that this "study" isn't much more than a bunch of charts and graphs. The most sophisticated statistical measure it uses is the arithmetic mean. While I don't expect such a study to use non-linear models, fixed effects or other such techniques (though it would be nice), I would at least expect to see a simple regression (better yet a multiple regression -- the number of potential lurking variables here is enormous) and a p-value. Is there really a statistical relationship between shareholder return (however defined) and executive compensation? You can't tell from this study. The only thing this study accomplishes is getting DolmatConnell & Partners some cheap publicity, perhaps duping some (perhaps overcompensated) CEO to hire their services.
Somehow, I think Scott Adams knows the difference between "lose" and "loose".
Remember: when you spell incorrectly you lose respect - and I will loose my dogs upon you.
"Live as if you'll die tomorrow." Ridiculous. You could die later today.
It's elementary. Every extra $million added to the CEO's salary takes a $million from the bottom line.
There was a nice example 2 years ago. Grasso, the chairman of the New York Stock Exchange, paid himself a salary which (including bonuses) entirely wiped out the total profits of the preceding 3 years.
In my opinion a CEO who pays himself more than, say, 40 times the median full-time salary in the company he/she heads should be jailed for theft. And don't give me any BS about "salaries are set by the Board". The people sitting on the boards of directors are almost entirely CEOs, recent ex-CEOs, or cronies of CEOs. They'll agree to the salary of the CEO of company X, because the CEO of company X sits on (or will soon sit on) the boards which have to agree their salaries.
I believe your parent was talking about very large companies, like the top dozen or so. Enron. Microsoft. Etc.
CEOs of most tech companies are being paid too damn much. Why is a CEO making around 180 times what someone starting out makes and probably still at least a 100 times what someone with many years experience is making?
4 words:
Cara Carleton Sneed Fiorina
Enough said?
HPOed
There was a show, 'Test the Nation' on the BBC a few years back where they get as many people as possible to take an IQ test and give some information about their lifestyle. They found the more someone earned, the lower their IQ tended to be.
mcbride and extort.......er i mean earn last year from sco?
Hmm. Your ideas are intriguing to me and I wish to subscribe to your newsletter.
Rich Kinder was most of the brains behind Enron's good parts, and I think he proved it again at building a far better company after Enron let him go.
Degaussing scares the bad magnetism out of the monitor and fills it with good karma.
If you were a kick ass person who can do miracles with company managment, you would request a pretty high salary for the risk of losing your reputation by saving a poor company (which would be close to impossible, too).
:)
Sometimes being a ceo for a certain company puts you infront of the public eye too, losing your private life etc, which cannot be paid good enough I suppose...
Then there are crappy ceo's too which fails far to often and still are too well paid, but that's nothing new is it?
The best way to bring CEO compensation in line would be for shareholders to dump stock in companies who have out of control CEO's. As most Americans are dumb, most shareholders are dumb and believe the BS peddled out by "rockstar" CEO's on CNBC. The problems with Corporate America are the same problem with American democracy... when the population is dumb they will choose dumb leaders and policies. The solution? Edumacate people gooder. ;)
Why spend money on a supermodel, or even a model, when you can buy a beautiful STD-free sex slave in Thailand and other parts of the world for around $1000 USD (costs vary by place of purchase). The only recurring cost is food! Gotta love how the slave trade is still alive in the world, and more profitable than ever.
CEO, who actually is a scientist, of all things. However, is her opinion worth 80 times that of my manager, or myself, both of whom are also PhDs? My manager is about the same age as her, understands the business well and is very smart. I hope people will say the same of me when I am mid/late-career. I could buy the argument that she should receive something like half a million - but not eight million.
I'm normally opposed to so-called "grammar Nazism" on /., but since your unjustified piece of flamebait breaks some of the most elementary standards of usage, you'll forgive me for not godding my stupid.
Of course, I knew what you intended to say. Just be cautioned not to call down idiot when you are in danger or being perceived as such yourself. Or, to regurgitate the classic adage: "Don't throw stones when you live in a glass house."
I'm curious what it is you claim to have read in the article that could have prevented my little joke. Admittedly, I didn't read the full study (linked PDF at the foot of the article), but I just glanced through it and didn't see anything along the lines of "People who make jokes about CEO salaries obviously haven't read this and obviously need to god their stupids."