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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
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..
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.
That book was by Jim Collins. His point was not that companies with higher paid executives performed worse, it was that in taking a cross-section of successful companies - those with higher paid CEO's didn't necessarily become more successful.
He has written a follow-up book titled "From Good to Great" which does another analysis concerning what it takes for a company to really elevate itself above its competitors. This book was written as a prequel to "Built to Last". It also highlights the same ideals, in that money is not necessarily THE PRIMARY motivator in a company that can become very successful. Successful being that its stock price displays gains of more than 3.2 points above the market consistantly across 15 years.
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.
The other thing to consider is that the CEOs at the poorly performing companies knew the companies sucked, and only took the jobs for big bucks. I've been recruited to an inferior company, and offered more money, because they knew they had to pay more than the superior company I was at. This happens all the time, as inferior companies try to buy their way out of inferiority.
Dude, I think I can see my house from here.
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...