Who cares about making a profit. What about being efficient?
Most governmental agencies are NOT efficient, which is why you see more and more people propose to run them like a ‘for profit’ business.
It sounds like you are against accountability. The agencies need to be accountable for something. You know where the money goes for agencies under the budget?
You’ll never guess, they go out and spend any and all monies under the budget (EVEN WHEN THEY DON’T NEED IT) so that their budget doesn’t decrease the next year.
Congressmen could vote to pay themselves a million dollars a year. It’s an excessive amount but the United States wouldn’t go broke over the half billion dollar total.
The problem with excessive salaries is the actual financial burden. For most businesses and governments, a few million dollars is a minor expense. But it’s a symptom of a larger problem: the divorce between your personal well being and the well being of the organization you represent. People develop the mindset that the organization exists for their benefit rather than they are working for the organization’s benefit.
Actually, I have no problem AT ALL with a salary. What I find horrendous is the compensation they get for leaving but hey that is why you ‘negotiate’ contracts in the first place.
They want to put and end to that? They need to learn some negotiation skills and stop overpaying for failure…
There are, however, some reasonable rationales for the compensation for leaving. I’m not saying I like it, but there are reasons.
First of all, what people often point to as a bonus for “leaving” is actually a payout of guaranteed compensation, or a buy-out of their employment contract, or stock options–it’s not technically salary for “leaving,” as much as it’s money that the company promised to pay the CEO (often to convince them to take the job), and are still obligated to pay whether the CEO works or not.
Secondly, as you note, this stuff is negotiated. Why do CEOs want to make sure they get paid whether the company likes them or not? CEOs have pretty strong incentives to not only want high pay, but guaranteed pay.
First, CEOs are often hired from well-paid jobs (say, CEO of another company). So they’re going to (reasonably) not want to take a salary cut. Further, CEOs are often taking a risk in moving to a new company–less job security (since they’ll be less established with their new company)–and so they’re going to want to be compensated for taking that risk–which includes being sure they are actually paid the compensation they negotiated.
Second, even if you’re a good CEO, being associated with a failing company can ruin your career. That’s another risk they quite reasonably want to be compensated for (by ensuring they get paid enough, and that the compensation is guaranteed-so that they will get paid)— companies in trouble are exactly where strong leadership is needed–someone who can turn them around.
It is cute that people think execs earn the money they make, unrealistic but cute. They go into a company and start cutting jobs. That means the bottom line will look good next year. Then they cut divisions and even more money is being made. The company is presented with great books and thinks the exec is a genius. But the work is not being done, the product is not being improved and the maintenance is going down. But Wall Street praises him and every body wants him. He goes off to a new company, and wash ,rinse repeat. The first place is now a smaller, weaker company that competes worse.
The money execs make can be thought of as jobs. he gets paid with thousands of jobs that he got rid of. The company makes out and can afford to give him much of the money saved by job elimination.
Often they move the jobs off shore. that makes them look good too. America suffers because we lose jobs, purchasing power and actual work not being done here. It can be thought of as anti-American and unpatriotic. But they are now international corporations. They owe loyalty to nobody and no land. They will exploit Americans as well as people from India and China and any 3rd world country that they can.
Banking execs merely brought the world economy to its knees. For that they got rich . Then instead of being arrested, we now allow them to start the same crap all over again. The bankers are selling the same crap they did before. They have acquired more banks and have become much bigger and far too big to fail. we are suckers.
Oh ok. Because it has happened does that mean it is a normal procedure. It is corporate infighting. It is not on principle. They simply hired another guy for more money or equal. they have not altered the corporate structure whatsoever.
Eisner is a great example. Eisner hired Orvittz as president. Orvitz was terrible and he was broomed after 14 months. His severance package was a mere 38 mill in cash and about 100 mill in stocks.
After tha,t the stockholder revolt required Roy Disney to use all his power to narrowly oust Eisner,who walked away with a ton of money. How does that prove they curbed runaway exec compensation. It simply proves corporations are executive candy stores.
Fiorina was listed as one of the worst 20 C.E.O.s of all time. She forced a merger with Compaq over the objections of the board and stockholders. They paid her 20 mill in cash to go away.
I wasn’t responding to the issue of “runaway compensation.” I was responding specifically to your claim that corporate boards are “powerless” which is absolutely false. Please re-read your claim for context.
The stockholders (the owners) voted and ultimately, a majority approved the deal. Maybe it was a bad deal but enough stockholders agreed with Fiorina at the time to do it. For that bad decision, the owners also suffered by way of lost equity. That’s the ups and downs of publicly listed companies. Sometimes, the owners (stockholders) are just as dumb or dumber than the CEOs.
Note .in both cases it took a huge stockholder to topple them. In the first case Roy Disney with a pile of stock was able to put a group together. In the second it took Hewitt to do the same. These are not examples of the effects of stockholders exercising their power, but rich and powerful stockholders staging a coup.
It is the government that produces the products and the corporations that benefit from it. You’re correct that corporations can market scientific innovation, but don’t be naive to think that its due to their high-quality R&D departments. Let’s use the pharmaceutical industry. Here’s a story about Taxol:
Taxol is a drug that selectively causes breast cancer cells to undergo cell cycle arrest and apoptosis. It’s from a tree, no joke. Extraction of Taxol was reported in The Journal of the American Chemical Society in 1971 and was funded by the National Cancer Institute, National Institutes of Health, and Duke University. The *in vitro activity of Taxol was published in 1979 funded by USPHS. * In vivo activity in taxol was published in a sequence of over 80 papers between 1981 - 1984 - nearly all of these funded by U.S or European governments. Bristol-Meyer Squibb filed a patent in 1992 followed quickly with published human studies in 1993. The FDA approved Taxol for the treatment of breast cancer in 1999.
I could go on and on: AZT, Prozac, and so many others have a similar story.
Corporations piggyback off government-funded ingenuity and proft enormously from it. What peeves me is that despite these innovations being tax-payer subsdized, we Americans pay *more * for the drugs discovered in this country than people in Europe or China. It’s madness.
If I were God-King of America, I’d enact a national pharmaceutical company. Now THAT would bring enough revenue for the construction of the Starship Enterprise.
Huge stockholders are still stockholders, and owners of the corporation. There’s no inherent problem with owning a lot of stock–as you seem to argue. In fact, with a big company, you’d expect any such change to be driven by major stockholders.
One reason is just scale-- Yahoo finance tells me that as of today, disney has a market capitalization of about 52 Billion dollars. At $28/share, that’s about 1.8 billion shares.
Do you seriously think you can get a majority of the stockholder vote without having a major (i.e. rich) stockholder on your side (or, realistically, several?).
Further, major stockholders are the ones with the most to gain/lose from a new CEO. They’re also the ones with the time and energy to put into figuring out if management is OK, or who to hire–an ordinary investor, who owns (say) $1,000 of disney stock, just isn’t going to spend a lot of time and energy into figuring out who to hire as a CEO.
Let’s put a number on it-- imagine a good CEO can change the value of a company by 50%. That means that our ordinary stockholder, if he really wants to be involved in finding a new CEO, will be willing to spend up to $500 on the search–that’s the amount he stands to gain or lose–his stock will be worth $1500 with a good CEO, or $500 with a bad CEO.
That’s not enough money to even fly to LA for a weekend, let alone spend a week there trying to find a new CEO. So what will our ordinary investor do? He’ll sell disney and buy some other stock. That’ll cost him twenty bucks or so.
(this describes a principle called the Wall Street Rule–Dissatisfied investors tend to sell their stock, and buy into a different company, rather than working to change governance–it’s just not worthwhile to do so in most cases).
What a ridiculous straw man. Nobody is saying the problem is people getting rich. The problem is people paying themselves ridiculously excessive salaries.
Paying themselves huge salaries and bonuses when the company is losing billions ,is the kicker. If someone wants to believe an exec all by himself can bring 50 % more sales, he is delusional. But why in that delusion does he not think a 50 % drop shouldn’t result in a huge drop in salary and zero bonus.
J.K.Galbraith in the “New Industrial State” called execs ratifiers. They accumulate information from the workers about a problem. Then they make a decision. But all the data they accumulate will make it for him. All he does is OK the info he was given. The significance of CEOs is way over rated, both by themselves and so many little people who view them with awe. They are employees of the corporation, and are no big deal.
I was replying (somewhat tounge-in-cheek) to this statement by Oakminster (which may also have been tongue-in-cheek): “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!”.”