That solves neither the conflict of interest problem already mentioned or the problem that for most small stockholders the time required to research compensation practices isn’t worth it. Anyhow, when funds make money by moving into and out of stocks, whoever has the stock when it is time for a vote has no real interest in the long term situation at a company.
The only exception to this seems to be some state pension funds, like Calpers, who sometimes make a stink.
Ehh… as mentioned, few CEO’s make big chunks of change, and most of them are in an elite group which can handle (or at least, are believed to be able to handle) huge multinationals. Getting into that group is damnably hard, even for brilliant leaders.
But, as I’ve been learning in my top-level classes (biz school at UT), it’s a huge risk. Becoming CEO can be a nightmare, working endless days and juggling ludicrously complex tasks. Your career can only go down from there, and that’s the ioptimistic angle. The pessimistic one is that you won’t have a career, because your company folds. You might have had no way to fix or save a dying company. It might happen for reasons that were impossible to predict. But you’re going to demand very good compensation because there’s good odds you’ll never be able to work again.
So which is it?
They can get voted out or they need to link the bottom line to salaries?
I don’t see how you can advocate one way for the private sector and another way for the public.
Since when did pointing out the existence of an “old boys network” become a conspiracy theory?
I think we can all agree that the ‘network’ exists, however it only works when a company is doing well or actually committing fraud
I think these execs need to be held accountable (criminally and personally) for their actions. If they are found to be guilty in either case, they need to reimburse the shareholders money.
Other than that, CEO’s should get paid whatever they are contracted to get paid.
Are you going to go after NFL players or NBA players next?
It isn’t an old boys network. The board members are people who battled their way up the ladder themselves, and have a great interest in seeing any company whose board they are on succeed. They might all seem affable and whatnot, but these are all guys who, when it comes to business, are hardasses. If the CEO is doing a bad job, they kick his ass and get all over him to show results. They don’t just throw money up in the air while cackling. That’s not the sort of person who makes it to the top.
The huge majority of stockholders are not informed of what goes on in the personnel room of the company. They would not vote or would cast an uninformed vote. No whining just fact.
Ah. The case I was thinking of was in the tens of millions of dollars range, so what the average CEO gets is irrelevant. I suspect the average CEO doesn’t have fancy compensation committees, and is trying to make payroll, especially these days. The concern is with the outliers, not the average - and the outliers are making 100 x the average. But I can see how you might think my response was saying the average CEO makes huge amounts, which is absurd.
And to reiterate, the case I was thinking of had the CEO salary be a very large chunk of earnings. That may be the case for the average also, but I don’t object to reasonable compensation even when times are tough - just unreasonable compensation, which means tens of millions of buck when that is close to or above earnings.
Yes, and like I said, why should I be afraid of the non-representative sample? If one or two companies are blowing their cash, out of thousands of companies, I can’t say that I care.
If they were invited onto the board by the CEO, don’t you think there is a bias that the CEO is a good guy? There are a million excuses for a company not doing well; if the directors make too much of a fuss, perhaps they will worry that their boards will raise a stink if their results start declining. Out of their control, of course. Plus, many board members are not CEOs, and are very busy people who are unlikely to study the issues all that deeply.
Have you read about the machinations that got Carly kicked out of HP? The directors who raised a fuss were pre-Carly, either children of the founders or VCs with a lot of experience. A board revolt like that makes the news because it is so rare.
I’m not counting CEOs in startups who get kicked out all the time by the VCs who hold the real power.
If the CEO who makes $150 K screws up a company, the impact is fairly small. If the CEO who makes $29 M screws up a company, there are thousands of layoffs and the economies of whole cities can be affected. The problem of executive compensation exists only in the outliers - throw those away and you are defining the problem out of existence.
They have access to the same information any other investor has. If they’re too lazy or otherwise can’t be bothered to vote their shares in an informed matter, the fault is theirs.
But really, that’s the fatal flaw of liberalism. Liberals don’t want to produce anything, or take responsibility for their own well being. They want to take from the haves and give to the have nots. The liberal mantra is “Success must be punished!”.
Because they are sitting over so much money, the board sees it as being that important to absolutely get the best guy.
No, why should they? They probably didn’t know him all that well beforehand, and they were invited in to do a job. I believe they are also given stock holdings, so they have a financial incentive as well.
Sitting on a board is “work”. You have to fly halfway across the country, look through documents of earnings and expenditures, get a big spiel read off about what the CEO is planning to do in the next quarter, you critique it, then you all get a nice dinner as payment before getting back on a plane and flying home.
These are all guys who can already afford a nice dinner at a nice restaurant. Flying halfway across the country for a business meeting and a dinner starts to suck after the 1000th time. Their payment comes in stock investment, and in knowing that they’re serving as a wise mentor service to someone else, just like they want to receive from their own board.
I genuinely doubt there is any major company where the CEO earned in one year’s time 80% of his company’s earnings. The only situation where that is possible is if earnings are extremely small.
Lee Raymond retired from ExxonMobil in 2005, and his compensation for his final year was reported at $400 million. [As an aside that is a very tricky number, in truth he received a lot of money as a retirement package, the current ExxonMobil CEO makes nowhere near that much compensation annually and neither did Lee Raymond until his final year with the company.] Even that outlandish sum represented only 0.11% of ExxonMobil’s earnings that year. That isn’t 10 percent, that is 11/100 of ONE PERCENT, or roughly one tenth of one percent.
I know that in some of the big Wall Street firms compensation sometimes reaches 60% or more of total earnings, but that is the total compensation of all the top level people in the firm, not one person.
Even in cases in which a CEO is the company founder I doubt you’d ever see annual compensation of 80%. A company founder who runs a multi-billion dollar company may see his assets fluctuate multiple billions in a single year, but that isn’t compensation that is his share of the company that he built and has owned since day one fluctuating with the market.
I’m not saying there is no way a CEO earned 80% of his company’s earnings in a single year, but I am saying it’s impossible for any Fortune 500 company and it was probably a very unusual situation. Even the most ludicrously overpaid CEOs with the biggest compensation packages don’t make anywhere near 80% of company earnings.
Even for the 500th company on the Fortune 500 80% of company earnings would equal $3.7bn, which I believe is far higher than the highest compensation package any CEO alive has ever earned. Again, “earned” is a lot different than someone who owned a ton of a stock and then over the course of the year had his assets balloon in value. Compensation is what you’ve “earned” in a year. So any NEW stock would count, but shares that you have held for ages and simply multiply in value aren’t properly looked at as part of your annual compensation package.
That is so stupid. So far I heard that mantra in one place, by you. So it must be your mantra.
Realistically it has been proved for a long time that stockholders don’t vote. that is how it has been through Dem and Repub times. It has been that way for generations. When I was in college, in the 60s it was taught in my econ class.
I just logged on ; didn’t have time to read all the posts, sorry if I repeat someone. But I had to say something because this has been bugging me for a long time.
They have a minimum wage right? Why not a maximum wage. As far as I’m concerned, anyone who needs more than, say a million dollars a year to be happy needs to rethink thier priorities. I know there are those out there who would call this undemocratic. They are wrong. It may be uncapitalistic, true, but true democracy requires at least some morality and concern for your fellow man to function. The money these fat cats demand drives up the prices on everything, harming everyone but themselves. Simply put they lack humanity.
So even if the “obscene amounts of money” he is making does NOT come from your pocket, you are offended by it? I’m afraid there is no cure for that kind of jealousy.
Ban all stock options given to execs. Or limit them to options that can only be exercised 10 years after the exec leaves the firm. Either that or start randomly executing any who make millions while their companies lose millions.