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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
"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?
I remember a business book from the 90s, "Built to Last", that also noted that companies with higher paid executives performed worse.
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.
Yeah, Lies, damn lies and statistics. Without oversight it's amazing what you can make metrics say. Don't like what one measure says? Come up with one that does!
"Hmm. The department costs too much in overtime, but we can't cut it or work won't get done and people will notice more problems since I took over. I know I'll show how much in Fringe Benefits we are saving by exhausting our current workforce rather than adding more headcount!"
A feeling of having made the same mistake before: Deja Foobar
A poorly performing company with little future will only be able to hire and retain top management by throwing money at them. No savvy CxO wants a sunk ship on his resume.
My S.O. _is_ an executive recruiter, and I know this happens.
It's not like other industries where good CEO-sense can take you a long way.
Aside from corruption from having special friends in the government, there is little evidence that good "CEO-sense" (whatever that means) has much to do with success. In fact, the only way we have of evaluating good "CEO-sense" is by looking backwards, which makes every CEO lucky enough to inherit a good market position "good" by tautology.
But as a predictor, as they always say in the buz, "past performance is not a guide to future performance".
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.
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.
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.
Sort of true, but not the complete picture. dBase IV was indeed the quality showpiece you describe (funny how yesterday's gods become today's devils) but more to the point the code was acquired by -- you guessed it -- Microsoft, who turned it into everyone's favorite mockery of a database, MS Access. When you can't compete, sue to cover your failures -- SCO didn't invent the technique.
Look up the story of Tom Rettig some time, one of the main developers, for a tid-bit of insight into the origin of the term "eating your own dog food". He used to co-star with a dog in the iconic TV series Lassie.
Do not mock my vision of impractical footwear
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.
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.
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.
After that, their idea of training us on new products was to put us in a room, and have us listen to someone read parts of the new product manual. They passed out copies of that manual, and then told us to go back to the phones and support the new product. We rarely got to even see the new hardware we were supposed to support.
Friends don't let friends line-dance.
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...
I think that the issue is tainted data. First, they take the top hundred tech companies. Then, they divide them into those that did well and those that did not. As a result, when they hired the CEO, those that did not do well were, on average, bigger than those that did do well. Why? Because if a company was at the bottom of the top 100 and did not do well, they fell off. The companies that are still there were bigger than the average tech company last year. Companies that did do well were smaller last year.
I think that the "study" basically says that bigger companies pay their CEOs more, which is not exactly insightful. IBM pays their CEO more than Adobe's? Really?
To get real data, they should have taken the top hundred companies from *last* year and seen how they did this year. They also might want to consider doing something like dividing CEO salary by last year's revenues. That would better control for the differences in size between companies like IBM and Adobe.
IBM: $12 million salary out of $96 billion revenue = 1/8000
Adobe: $1.9 million salary out of $1.9 billion revenue = 1/1000
Note: revenue numbers may not be from last year; too lazy to find details in google links.
It looks like Chizen is actually paid better per dollar of revenue than Palmisano is.
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
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....