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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
I remember a business book from the 90s, "Built to Last", that also noted that companies with higher paid executives performed worse.
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.
If correlation==cause, does that mean Steve Jobs (current salary: $1) would head a list of the world's best CEOs?
Anyway, a few months later we hear news from Bangkok (of all places) of a stock scam. Guys in a "boiler room" had been selling a bunch of stocks in various companies. They would deliberately pick companies that were heading for bankruptcy (or could be pushed in that direction) and make press releases about the amazing stuff they were doing and produce nice glossy brochures. They'd then use this material to hard sell the stocks by phone. When the companies failed they'd then run off with the money paid for stocks knowing that they'd never have to pay out. (I don't fully understand the mechanics of this despite reading an article in Time about this exact scam.) Anyway, on the list of companies being traded, there was our company!
The key staff (who actually did work) at the company jumped ship. Almost everyone else followed. But bizarrely the company didn't need any staff to continue its scamming. They carried on making press releases describing their (imaginary) work and I remember reading a news story in which I myself was quoted talking about my work there, long after I left! On the basis of this they managed to get multi-million dollar grants from a US city famous for its Mafia connections and presumably, with few staff to pay, the CEO could pay himself very handsomely.
One day I want to write a book about our company. (I did start a Wikipedia entry which hasn't been deleted yet.) Sadly I think of it as 'ours' because a bunch of us worked hard to make it a world-class company that competitors looked up to. Unfortunately, due to the large number of Italian names of the people involved, and the aforementioned reputation of the city that was involved, I might wait a few years.
Doesn't it make you feel good to know that our freedoms are protected by politicans, lawyers and journalists.
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.
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.