Are CEOs 300 times more valuable than their lowest-paid workers?

[Warlord23]

I get it. Eddy Curry got lazy and Fuld ed up. Those two specific examples aren't any more relevant to the respective generalized questions than Tim Duncan and Steve Jobs are.

The examples merely showed what is possible within the respective systems. Do you think that there is nothing wrong with a system where 2 individuals could be rewarded in a similar manner, despite performing in drastically different ways?

[vy65]

" ty decision making by the board" is part of the problem with the system. Board members themselves are people who have lived and breathed this system, and succeeded in it. They are people who have typically benefited from similar compensation schemes, and would have little motivation to do it differently.

What's your point then? Some business make bad decisions - and they pay the consequences for them. Sometimes those decisions relate to compensation. What's your solution for preventing boards from making bad choices?

There are some career board members. But to think that they're some kind of crony ignores 1) the massive pressure these members face from the (ins utional) investors/shareholders who elected them in the first place and 2) the fact that if they develop a reputation as a crony, the less likely future gigs on other companies' boards become.

Where exactly did I assert that all executives are evil and lazy? Stick to the facts. Moreover, I didn't generalize. I pointed out what was possible - how CEOs could maximize short-term gains with impunity. I never claimed that most or all of them actually do it.

When you criticized the "system." Also when you compared them to Eddy Curry. Oh and also when you said this:

Board members themselves are people who have lived and breathed this system, and succeeded in it. They are people who have typically benefited from similar compensation schemes, and would have little motivation to do it differently.

With regard to fixing the system: why not make a significant % of CEO bonuses kick in 5 years (or more) after after the CEO takes charge. Pay him a hefty bonus if he delivers in a sustainable manner for 5 years, pay him even more if he can keep it up for 10 years. Why throw money at him for showing results for just 1 year?

My understanding is that a significant portion of Long Term Incentive pay is already wrapped up with stock performance - so that's already a part of the system that you think is so ed up already. Of course, this differs from company to company.

Also, its not necessarily a good idea to emphasize long term pay. Sometimes, it might be better to make a corporation more attractive in the short term at the expense of long term growth if the corp. is looking towards being bought or merged.

[Warlord23]

What's your point then? Some business make bad decisions - and they pay the consequences for them. Sometimes those decisions relate to compensation. What's your solution for preventing boards from making bad choices?

As I said, the compensation system is the one that needs to be revamped. Boards themselves operate within a framework that makes these bad decisions possible - I didn't criticize them, nor do I consider them cronies.

When you criticized the "system." Also when you compared them to Eddy Curry. Oh and also when you said this:

Oh, I do criticize the system, but that does not mean I call everybody who plays in the system crooked, or compare everyone to Eddy Curry. Evidently, you're either unable to grasp this point or are doing a poor troll job.

My understanding is that a significant portion of Long Term Incentive pay is already wrapped up with stock performance - so that's already a part of the system that you think is so ed up already. Of course, this differs from company to company.

Also, its not necessarily a good idea to emphasize long term pay. Sometimes, it might be better to make a corporation more attractive in the short term at the expense of long term growth if the corp. is looking towards being bought or merged.

The ratio of salary + bonus is typically 50% or more of the total pay. I remember reading that the Barclays CEO made more than 60% of his total pay in bonuses. That is way too much IMO.

[Wild Cobra]

I don't have a problem with Jobs making a ton of money.

I have a problem with a CEO making billions while tanking a company and then getting a golden parachute on the way down.

I agree, and perhaps the bulk off their money should be paid after a few years to see the impact of their direction, rather than quarter-to-quarter.

[vy65]

As I said, the compensation system is the one that needs to be revamped. Boards themselves operate within a framework that makes these bad decisions possible - I didn't criticize them, nor do I consider them cronies.

That "system" is indistinct from how any other corporate decision is made. If you think it needs revamping, then you think that the entire structure of how corporate decisions are made needs to be revamped.

The fact is that several independant bodies influence compensation decisions. Consulting firms work closely with compensation committees, which are comprised of independant directors, who set executive salary + bonus. What's wrong with this framework?

Oh, I do criticize the system, but that does not mean I call everybody who plays in the system crooked, or compare everyone to Eddy Curry. Evidently, you're either unable to grasp this point or are doing a poor troll job..

I don't get it. If the majority of people who work in the system aren't crooked or lazy or rewarded for being lazy, then why does the system need to be changed? Does some amorphous "framework" hover over these people, influencing them to do evil or be lazy?

There is no system outside of the people who comprise a companies governance structure. Sure, certain bylaws might tempt them to do something, but you can't just say the system is broke but people are good.

The ratio of salary + bonus is typically 50% or more of the total pay. I remember reading that the Barclays CEO made more than 60% of his total pay in bonuses. That is way too much IMO.

Do you have statistics showing that this is true for most large companies?

What's wrong with an executive making most of his money from a bonus - which is usually tied with corporate performance and not guaranteed $ like a salary? Isn't that what you're pining for?

[coyotes_geek]

The examples merely showed what is possible within the respective systems. Do you think that there is nothing wrong with a system where 2 individuals could be rewarded in a similar manner, despite performing in drastically different ways?

Correct. I don't think there is anything wrong with a system that allows CEO's to make a load of money or NBA players to get max contracts.

[LnGrrrR]

Correct. I don't think there is anything wrong with a system that allows CEO's to make a load of money or NBA players to get max contracts.

I think the question would be whether or not the "max contract" system is the most effective way to run things.

[Warlord23]

That "system" is indistinct from how any other corporate decision is made. If you think it needs revamping, then you think that the entire structure of how corporate decisions are made needs to be revamped.

The fact is that several independant bodies influence compensation decisions. Consulting firms work closely with compensation committees, which are comprised of independant directors, who set executive salary + bonus. What's wrong with this framework?

Your conclusion that everything needs to be revamped is incorrect. I am not advocating doing away with the concept of an independent board, audit/consulting firms et al, because my analysis itself did not cover all aspects of corporate decision making. Restricting this discussion to executive compensation, why not finalize a maximum bonus % based on shareholder voting, which will cap the bonus that directors can award on a yearly basis?

I don't get it. If the majority of people who work in the system aren't crooked or lazy or rewarded for being lazy, then why does the system need to be changed? Does some amorphous "framework" hover over these people, influencing them to do evil or be lazy?

There is no system outside of the people who comprise a companies governance structure. Sure, certain bylaws might tempt them to do something, but you can't just say the system is broke but people are good.

The % of people who are actually crooked or lazy is irrelevant. The fact that such behavior can be allowed, and indeed rewarded, is the problem. The destructive effect of a small minority being able to take disproportionate risk has been demonstrated by Lehman et al. I have no opinion on whether "people are good or not".

Do you have statistics showing that this is true for most large companies?

What's wrong with an executive making most of his money from a bonus - which is usually tied with corporate performance and not guaranteed $ like a salary? Isn't that what you're pining for?

I don't have comprehensive statistics. This is a book by Prof Rakesh Khurana of Harvard (link) that basically shows that the ROI of CEO compensation is much lower than other forms of outlay. Also, here is the article which I referred to earlier regarding the Barclays CEO. His salary (1.5M pounds) + bonus (6.5M pounds) = 8M pounds makes up 80% of his 10.1 M pound compensation package.

My objection to the bonus is the fact that it is linked to short-term performance, as opposed to restricted stock that is linked to long-term performance

[Warlord23]

Correct. I don't think there is anything wrong with a system that allows CEO's to make a load of money or NBA players to get max contracts.

You didn't answer my question. Are you in favor of a system that allows bad risk-taking CEOs that damage their firm in the long run to earn the same as (and maybe even more than) CEOs who manage/grow their firm in a sustainable manner?

[coyotes_geek]

I think the question would be whether or not the "max contract" system is the most effective way to run things.

Depends on who we're letting define "most effective".

You didn't answer my question. Are you in favor of a system that allows bad risk-taking CEOs that damage their firm in the long run to earn the same as (and maybe even more than) CEOs who manage/grow their firm in a sustainable manner?

Yes. I'm in favor of a system that allows bad CEO's to make as much as good CEO's. I'm in favor of it because there's a difference between "the system" and whether or not specific decisions made by individuals operating within that system are good ones or bad ones. I may not like every outcome that results from that system, but that shouldn't be an indictment of the system as a whole.

I'm also in favor of the system that allows average individuals to drive cars, even though some of us are going to kill ourselves and/or others.

[boutons_deux]

Salary Ceiling, a Lever for Change



http://www.truth-out.org/print/68472

[Agloco]

You didn't answer my question. Are you in favor of a system that allows bad risk-taking CEOs that damage their firm in the long run to earn the same as (and maybe even more than) CEOs who manage/grow their firm in a sustainable manner?

Good argument. I'm interested in your thoughts on how to correct this though. Preferably without salary caps.

[coyotes_geek]

Salary Ceiling, a Lever for Change



http://www.truth-out.org/print/68472

Everyone in favor of having the government determine what your "maximum acceptable income" is, please raise your hands.

[LnGrrrR]

Everyone in favor of having the government determine what your "maximum acceptable income" is, please raise your hands.

If banks are going to rely on taxpayer assistance, I don't think it's unfair. If banks can make it on their own, then they can determine whatever salary is fair.

[ManuBalboa]

Is there a point to answering this poll. Is the Government going to start regulating this pay ratio?

Is life fair?
a) yes
b) no

[ManuBalboa]

If banks are going to rely on taxpayer assistance, I don't think it's unfair. If banks can make it on their own, then they can determine whatever salary is fair.

We pay taxes, yet our government CEO's continue to run the country into trillions dollars of debt. Obama should give the country every cent from his future post-presidential book deals and University speeches tbh.

[Sec24Row7]

Honestly... it is for the shareholders of the company to decide... all the workers work for the owners...

[v2freak]

The issue of aligning shareholder and top management's interests has always been a question of: what system works better than giving the C-Suite stock options? Somebody pointed out that often CEOs may try to work towards the short term instead of using Alfred Rappaport's long term shareholder value model. As I understand it, more companies are implementing options that cannot be cashed in until years after an executive has worked for a company. I do agree golden parachutes are pretty terrible. The only worth I find in them is they discourage takeovers, but that's why you have staggered boards and poison pills.

Also, more taxes on dividends and capital gains? Does President Obama want big business out of the US?

[boutons_deux]

Immune to Cuts: Lofty Salaries at Hospitals

In an urgent search to cut the state’s health care costs and lift revenue, a task force came up with a plan to increase the cost of a hospital stay by $5 and to limit housekeeping services for the disabled in their homes.

One area of plump costs, however, remained undisturbed: executive suites where salaries and compensation run into the millions of dollars, even at the most financially struggling hospitals.

A proposal to allow public financing for only the first $1 million in wages for an executive died before it even reached the task force. “It was classic how it was killed,” said Judy Wessler, director of the Commission on the Public’s Health System, an advocacy group that had suggested the limits.

“We submitted the proposal in writing, met with the state staff members about it, then testified for our two minutes at a hearing,” Ms. Wessler said. “Then in the written summary of all the 4,000 proposals, they twisted the wording of ours so that it would be impossible to implement. Then they said it was not viable, so it wasn’t even put up for a vote.”

http://www.nytimes.com/2011/03/16/ny...gewanted=print

===========

Executive salaries at taxpayer-funded (medical) facilities is high on the list of Repug/tea bagger deficit reduction targets, right?

[TeyshaBlue]

Executive salaries at taxpayer-funded (medical) facilities is high on the list of Repug/tea bagger deficit reduction targets, right?

It ranks about where it does for the rest of congress.

[boutons_deux]

Repugs/teabaggers are deficit hawks above all, even above "where are the jobs?".

For some reason, executive compensation and corporations in general are NEVER the target of these two groups (if they really are two distinct groups).

[Wild Cobra]

If banks are going to rely on taxpayer assistance, I don't think it's unfair. If banks can make it on their own, then they can determine whatever salary is fair.

What we have to do is either make all CEO's to sign new contracts for a bailout to take effect, or let then go bankrupt. Thing is, for the way accounting takes place, the bailout money became positive cash influx for bonus calculations.

[johnsmith]

LOL, RG's jealousy of the wealthy cracks me up.

[RandomGuy]

LOL, RG's jealousy of the wealthy cracks me up.

Not really all that jealous, but I do wonder just how much wealth any one human being should have.

I also know that extreme wealth is much more accidental than many would admit.

[RandomGuy]

Seems like when you actually inform the shareholders of a company how much their executives are actually making, they tend to take a dim view of the packages.

This suggests to me that your average CEO profits immensely from shareholder ignorance, and that the "free-market" has jack to do with CEO pay.


HP's board purge cleared but pay packages scolded
http://www.heraldnet.com/article/201...901/1011/BIZ02

In January, HP said it was replacing a third of its board as the company tried to shake off the scandal. Four directors who had been particularly vocal in the debate over Hurd's ouster were leaving the board, and five new directors were coming in. Some corporate governance experts expressed fears that Hurd's replacement, new HP CEO Leo Apotheker, played too big of a role in picking the new directors, and called for investors to punish some sitting board members by withholding their votes for allowing it to happen. HP has said that its board acted properly.

For instance, as HP's top manager, Apotheker has received a compensation package that could be worth tens of millions of dollars, including a $1.2 million salary and $4 million cash signing bonus. In addition, HP was heavily criticized for approving a severance package for Hurd that was in the tens of millions of dollars, some of which he had to give back as part of a settlement.