Posted on 05/02/2011 6:46:41 AM PDT by SeekAndFind
Few things raise the dander of radical egalitarians more than the growth of CEO pay. The umbrage is as much aesthetic as it is economic, as evidenced by the fact that the most impassioned complaints leveled against these corporate titans are not so much criticisms of their failure to deliver value for money but over the gap between CEO pay and wages for everybody else. That's because the former criticism raises the inconvenient question, value to whom? And therein lays the answer to the riddle posed by this column.
First the facts. CEO pay has undoubtedly been on a tear. The numbers are eye popping. And I don't mean just for the founder-CEOs who can lay claim to creating the machine that pays them. The hired hands are raking it in as well. According to salary.com average total compensation for a representative sample of S&P 500 CEOs exceeded $11M in 2010. That's a boatload of money. How can you not suck in your breath when you hear that?
But the story takes on different shades of meaning from there. Google up the words CEO Pay and you notice a few interesting things. First, the AFL-CIO has purchased the right to be at the top of the first page of search results. Taking their cue from President Obama's recent declaration of class warfare, this lets them show off their new Executive Paywatch website that documents the unseemliness of excessive CEO pay. Prominent on the site is a chart showing how many nurses, teachers, police officers, and fire fighters could be supported if you could somehow confiscate and redistribute the pay of an average CEO. No, our nation's union bosses aren't demanding that - yet. But the inference is inescapable.
(Excerpt) Read more at realclearmarkets.com ...
I would ask those shareholders if they took the time to weigh in on the board of directors. CEO pay and compensation is up to the board.
Why does that "get" you? I certainly understand a bit of honest (and harmless) envy when it comes to executive compensation, but it shouldn't rise to anything greater than that.
Not that it alleviates any frustration, but golden parachutes are the price corporations pay to secure the talent and secure their "secrets". This happens even among the lower compensated set in certain key roles: "come work for us, but if you do, you can't work with any of our competitors for 18 months (or 12, or 24, etc.)" I was faced with that scenario. If you want me to bite that lure, you better give me some consideration on the back end.
When CEO pay comes from taxpayer-funded bailouts then it is my business.
That doesn’t sit too well with me either. Patriotism seems to be dead among the CEO class.
I agree. Compensation should be determined by the value of the product produced. CEO salaries are higher than their workers by a factor of 100s. Now is a CEO’s work really worth 300 times more than that of their workers? Given all the failed banks and companies that came groveling to the federal government begging for handouts, sorry, bailouts, I rather doubt it. As for the celebrity class even doctors don’t make as much as they do and a doctor’s work is far more valuable to the community than anything Lady Gag Me could produce.
The root of this problem is America’s blind idolatry of the rich, regardless of how they made their money. Some, like doctors, worked hard and studied for years to gain their wealth. Others, like Paris Hilton or Lady BlahBlah, were born into it and/or were lucky that enough of the American public was stupid enough to buy the tripe they were selling.
YUP! MYOB! You nailed it...
I partially agree with you, but your point also illustrates an argument for exhorbitant CEO pay.
If an organization's failure (AIG, for example) would result in the complete unraveling of a giant sector of the world economy, I would think the CEO should be compensated handsomely; wildly, even, in comparison to the admin assistant working in Claims on the 3rd floor.
Very few people out there get paid "what they are worth", whether that worth is defined by their contributions to the company or the potential they bring on the front end.
Generally speaking, people are paid for the role they play. The company values roles in different ways, and compensates accordingly.
“CEO pay and compensation is up to the board.”
And traditionally that’s been an incestuous relationship. A member of the board isn’t going to listen to someone with $5k worth of stock.
Did you READ the article???!!!
“There are only three constituents that have a dog in the fight over pay for any given CEO, and that is the customers, employees, and shareholders of said corporation. “
Did a.n.y.o.n.e read the article??!!
“There is one important exception to this, of course, and that is if Congress has forced you to become a silent partner in a company by diverting your taxes into that company’s coffers. General Motors, any company getting perennial farm subsidies like Archer Daniels Midland, over five hundred banks that haven’t paid back their TARP bailout, government sponsored monstrosities like Fannie Mae and Freddie Mac, and beltway bandits feasting off federal contracts are good candidates.
In those cases every taxpayer has a right to scream and yell and demand that the CEO’s pay be cut, his private jet grounded, his limo auctioned off, and his free gym membership cancelled until he gets his snout out of the public trough. “
No, you don’t understand.
I’m all for the free market. People can make what other people will give them.
But looking at it from a strictly practical - or even moral - view; seriously, who actually contributes something real useful to society?
I am tired of hearing communists spout off about evil corporations and their CEOs, etc, in the news and for all to hear, when they don’t give a hoot about rich people that don’t actually make or do anything useful for society.
That is called (serious) hypocrisy.
Bingo.
A CEO’s job is to maximize long-term returns for shareholders, not to preserve jobs. To the extent the American labor market is not competitive, the blame lies with politicians and unions.
The problem with that idea is that stock price is 75% market/emotion and 25% company specific numbers.
Profit means it goes up, loss means it goes down, in general, but if you’re in a bad “sector” or the market as a whole is bad, sometimes there isn’t much you can do.
We have this idolatry for rich people who are famous celebrities, but these same people (the idolizers) hate anyone who runs a business and makes a few bucks.
There has to be a balance. CEO’s should make a lot of money, otherwise why put up with the demands of being a CEO? However, I do have a problem with it not being mostly tied to profit and performance, etc and a previous posters mention of many CEO’s forgetting their roots and losing their patriotism.
If the shareholders are ok with it, then I’m ok with it.
Sometimes those golden parachutes are worth every penny to the company to get rid of a BAD CEO. If you could get rid of one for say, 10 mil, versus the company losing another 50 mil by keeping the bad CEO until the end of their contract, what would you do? Most would cut their losses quickly. Thomas Sowell explains this very well in his books.
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