# Why Are US CEOs so Grossly Overpaid? **URL:** \ **Category:** Great Debates\ **Created:** [June 12, 2009, 4:24pm UTC](https://boards.straightdope.com/t/why-are-us-ceos-so-grossly-overpaid/499562 "2009-06-12T16:24:26Z")\ **Posts on this page:** 20\ **Page:** 4
**Author:** ![mazinger\_z](https://avatars.discourse-cdn.com/v4/letter/m/5f9b8f/32.png) [@mazinger\_z](https://boards.straightdope.com/u/mazinger_z)\ **Post date:** [June 16, 2009, 4:45pm UTC](https://boards.straightdope.com/t/why-are-us-ceos-so-grossly-overpaid/499562/61 "2009-06-16T16:45:34Z")
> [@Voyager](#): > > It is hard to convict in many of these cases, except for seriously flagrant cases like Tyco and Enron. It is clearly not working to prevent bad behavior. This is not entirely true, at least I don’t perceive it to be. There is a good size industry in white collar crime. These alleged perps are typically are the easiest to roll. While it is easier to go after the company than the individual perpetrator, I believe the mere threat of imprisonment and forfeiture does a fairly great job of shaping behavior. Additionally, many deals are cut to keep names and allegations out of the press. Ever since Arthur Anderson, the first words I hear out of the various auditors (and we use a lot for our different divisions), up and down the line, is that they take their commitment seriously. As to the OP, while I do not think about this issue too much, I think given the size of the American economy and the lesser regulations, I think those two things will cause a great deal of variance in the CEO wages vis-a-vis the regular corporate drones. ---
**Author:** ![Mr.Kobayashi](https://avatars.discourse-cdn.com/v4/letter/m/4af34b/32.png) [@Mr.Kobayashi](https://boards.straightdope.com/u/Mr.Kobayashi)\ **Post date:** [June 16, 2009, 5:46pm UTC](https://boards.straightdope.com/t/why-are-us-ceos-so-grossly-overpaid/499562/62 "2009-06-16T17:46:08Z")
> [@amarone](#): > > BA had wages + social security costs of £1.62bn for fiscal 2009, so if everyone worked for free for a month, that would save £135m. Doing the same thing for a couple of dozen executives would save maybe 1% of that. That’s assuming everyone does it, of course. The point is, if the company is in such dire straits as to ask its employees to be effectively volunteers for a month any other cost cutting measures (like cutting executive pay) should be taken alongside it. ---
**Author:** ![gonzomax](https://avatars.discourse-cdn.com/v4/letter/g/e8c25b/32.png) [@gonzomax](https://boards.straightdope.com/u/gonzomax)\ **Post date:** [June 16, 2009, 7:12pm UTC](https://boards.straightdope.com/t/why-are-us-ceos-so-grossly-overpaid/499562/63 "2009-06-16T19:12:48Z")
Cutting workers is not a way to strengthen a company. It is a way to create a temporary great bottom line. Work does not get done but the huge profit shown gives execs gigantic bonuses. It is a technique that served top execs quite well. Note of course the companies wind up weaker and smaller when they leave. Energy companies spearheaded this system a few years ago. We got Enron and many other fiascoes as a result. They cut workers and investors made a ton, the execs even more. Of course a failing grid and a huge increase in energy cost was not a boon to the people. The company then has to contract the work to get it done. The contract companies paid lower wages and gave kickbacks to the execs. The public got hosed. It should be shameful for a company to layoff workers. In America we see it as a great executive decision. It shows bad management . It demonstrates no loyalty to workers who give their lives to companies. It is stunning of what we can convince the public . They actually side with the management as it loots a company. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [June 16, 2009, 7:24pm UTC](https://boards.straightdope.com/t/why-are-us-ceos-so-grossly-overpaid/499562/64 "2009-06-16T19:24:49Z")
> [@mazinger\_z](#): > > This is not entirely true, at least I don’t perceive it to be. There is a good size industry in white collar crime. These alleged perps are typically are the easiest to roll. While it is easier to go after the company than the individual perpetrator, I believe the mere threat of imprisonment and forfeiture does a fairly great job of shaping behavior. Additionally, many deals are cut to keep names and allegations out of the press. Ever since Arthur Anderson, the first words I hear out of the various auditors (and we use a lot for our different divisions), up and down the line, is that they take their commitment seriously. How are you defining white collar crime? At the lower levels I agree that convictions might not be too tough. However articles on CEO malfeasance have always said what a difficult thing getting a conviction is, in no small part due to the fact that the manipulation is done involving very complex processes hard to explain to a juror. But to get back on track, the problem isn’t really CEO crime. I think the problem is more the CEO who drives down stockholder value perfectly legally. ---
**Author:** ![amarone](https://avatars.discourse-cdn.com/v4/letter/a/e0b2c6/32.png) [@amarone](https://boards.straightdope.com/u/amarone)\ **Post date:** [June 16, 2009, 9:24pm UTC](https://boards.straightdope.com/t/why-are-us-ceos-so-grossly-overpaid/499562/65 "2009-06-16T21:24:18Z")
> [@Mr.Kobayashi](#): > > That’s assuming everyone does it, of course. The point is, if the company is in such dire straits as to ask its employees to be effectively volunteers for a month any other cost cutting measures (like cutting executive pay) should be taken alongside it. But that is not the question I answered. You originally asked how effective it would be snipping the wages of lower-runs versus higher-ups. The answer is “very effective”. ---
**Author:** ![msmith537](https://avatars.discourse-cdn.com/v4/letter/m/d9b06d/32.png) [@msmith537](https://boards.straightdope.com/u/msmith537)\ **Post date:** [June 17, 2009, 2:07pm UTC](https://boards.straightdope.com/t/why-are-us-ceos-so-grossly-overpaid/499562/66 "2009-06-17T14:07:01Z")
I think the issue is a bit colored by certain people’s dislike for all things corporate or indicitive of excessive wealth. But as someone who is professionally involved in the field of corporate fraud and litigation, I believe there are problems. From what I’ve seen is that there is a sense of elitism, greed, entitlement and self agrandizement that is pervasive in corporate America. Not everywhere. But I see it in certain industries like consulting, investment banking, law, and within the upper echelons of many large companies. It’s a mentality of “get what you can, while you can” and it starts with new associates coming out of business school. [Wack-A-Mole] Not sure if back dating was or is legal but you can see CEOs have a way of sidestepping these problems. [/quote] Illegal. I made a great deal of money working on backdating cases a few years ago. To give you an idea of what I’m talking about above, I think there is a certain hypocracy in a consulting firm and their client expensing a lavish steak dinner with wine while you are conducting an investigating on their behalf. But it’s like AIG going on their retreat. It’s just sort of done and no one really gives it a second thought. ---
**Author:** ![Ffperson](https://avatars.discourse-cdn.com/v4/letter/f/f19dbf/32.png) [@Ffperson](https://boards.straightdope.com/u/Ffperson)\ **Post date:** [June 22, 2009, 4:47am UTC](https://boards.straightdope.com/t/why-are-us-ceos-so-grossly-overpaid/499562/67 "2009-06-22T04:47:48Z")
I’ve read that part of the reason why American CEOs are paid more than European and Asian CEOs are that more American CEOs are recruited from other companies and other industries while European and Asian CEOs are more likely to have been a veteran of the company, a lifer. (Think it was from “The Winner-Take-All Society”) As anybody whose been working in the corporate culture for a while knows, its easier getting a pay raise switching companies, then staying in the same place for a while. ---
**Author:** ![DanBlather](https://avatars.discourse-cdn.com/v4/letter/d/f4b2a3/32.png) [@DanBlather](https://boards.straightdope.com/u/DanBlather)\ **Post date:** [June 22, 2009, 5:13am UTC](https://boards.straightdope.com/t/why-are-us-ceos-so-grossly-overpaid/499562/68 "2009-06-22T05:13:04Z")
Another factor to consider is that the nature of creating wealth in the US has changed dramatically. Wealth used to be created by making things like cars and steel, or mining things like oil and coal. Now you get rich by speculating on stock prices or through derivaties. Stockholders are no longer long term investors looking to get a steady and safe dividend. They are more interested in the short term movement of the stock price which may have little or no relation to a company’s long term viability. In this situation a CEO would be derelict in his/her duties if they did not look after the shareholder’s desires by stressing stock prices over fundamentals. ---
**Author:** ![crazyjoe](https://avatars.discourse-cdn.com/v4/letter/c/f14d63/32.png) [@crazyjoe](https://boards.straightdope.com/u/crazyjoe)\ **Post date:** [June 22, 2009, 4:45pm UTC](https://boards.straightdope.com/t/why-are-us-ceos-so-grossly-overpaid/499562/69 "2009-06-22T16:45:59Z")
> [@amarone](#): > > BA had wages + social security costs of £1.62bn for fiscal 2009, so if everyone worked for free for a month, that would save £135m. Doing the same thing for a couple of dozen executives would save maybe 1% of that. That, and at the end of the year the CEO can make a justification for a bonus tripling what he lost in that month by the end of the year, but the employees will take years to make it back up, because “the company can’t afford to hand out that many bonuses.” ---
**Author:** ![amarone](https://avatars.discourse-cdn.com/v4/letter/a/e0b2c6/32.png) [@amarone](https://boards.straightdope.com/u/amarone)\ **Post date:** [June 22, 2009, 4:50pm UTC](https://boards.straightdope.com/t/why-are-us-ceos-so-grossly-overpaid/499562/70 "2009-06-22T16:50:30Z")
> [@crazyjoe](#): > > That, and at the end of the year the CEO can make a justification for a bonus tripling what he lost in that month by the end of the year, but the employees will take years to make it back up, because “the company can’t afford to hand out that many bonuses.” I have not commented either way on what BA should do, or what is morally and ethically correct. I just answered one very specific question. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [June 22, 2009, 5:32pm UTC](https://boards.straightdope.com/t/why-are-us-ceos-so-grossly-overpaid/499562/71 "2009-06-22T17:32:32Z")
> [@DanBlather](#): > > Stockholders are no longer long term investors looking to get a steady and safe dividend. They are more interested in the short term movement of the stock price which may have little or no relation to a company’s long term viability. > > In this situation a CEO would be derelict in his/her duties if they did not look after the shareholder’s desires by stressing stock prices over fundamentals. True, but he isn’t doing any favors to the stockholders around when the lack of attention to fundamentals kills stockholder value two years down the pike. But I agree that this is the reason there is no real stockholder governance. ---
**Author:** ![BlinkingDuck](https://avatars.discourse-cdn.com/v4/letter/b/eada6e/32.png) [@BlinkingDuck](https://boards.straightdope.com/u/BlinkingDuck)\ **Post date:** [June 25, 2009, 3:57pm UTC](https://boards.straightdope.com/t/why-are-us-ceos-so-grossly-overpaid/499562/72 "2009-06-25T15:57:11Z")
Can we not outsource the CEO position to Europe/England? Why not? It saves money. What makes the CEO position so different from other outsourced positions? ---
**Author:** ![msmith537](https://avatars.discourse-cdn.com/v4/letter/m/d9b06d/32.png) [@msmith537](https://boards.straightdope.com/u/msmith537)\ **Post date:** [June 25, 2009, 8:39pm UTC](https://boards.straightdope.com/t/why-are-us-ceos-so-grossly-overpaid/499562/73 "2009-06-25T20:39:07Z")
> [@BlinkingDuck](#): > > Can we not outsource the CEO position to Europe/England? > > Why not? It saves money. What makes the CEO position so different from other outsourced positions? Because with most outsourced jobs, it doesn’t really matter who does them and those jobs are often not part of the company’s core business. It doesn’t really matter who supports the email servers or manages the call center because there is little real practical differentiation between two system admins or two call center operators. The CEO OTOH, is supposed to bring unique leadership and vision to his company. He is supposed drive the business strategy. Some guy in Europe may not know all the nuances of how our business works. Also you don’t outsource one fucking guy. ---
**Author:** ![Ruminator](https://avatars.discourse-cdn.com/v4/letter/r/b9bd4f/32.png) [@Ruminator](https://boards.straightdope.com/u/Ruminator)\ **Post date:** [June 25, 2009, 8:59pm UTC](https://boards.straightdope.com/t/why-are-us-ceos-so-grossly-overpaid/499562/74 "2009-06-25T20:59:17Z")
> [@msmith537](#): > > Also you don’t outsource one fucking guy. Sony (Japan) has [CEO](http://en.wikipedia.org/wiki/Howard_Stringer) from Britain that lives in USA. If Sony can outsource their CEO, I’m guessing the outsourcing of USA President is next – just a tiny amendment to the Constitution is all that’s needed. ---
**Author:** ![BlinkingDuck](https://avatars.discourse-cdn.com/v4/letter/b/eada6e/32.png) [@BlinkingDuck](https://boards.straightdope.com/u/BlinkingDuck)\ **Post date:** [June 25, 2009, 9:06pm UTC](https://boards.straightdope.com/t/why-are-us-ceos-so-grossly-overpaid/499562/75 "2009-06-25T21:06:15Z")
> [@msmith537](#): > > Because with most outsourced jobs, it doesn’t really matter who does them and those jobs are often not part of the company’s core business. It doesn’t really matter who supports the email servers or manages the call center because there is little real practical differentiation between two system admins or two call center operators. > > The CEO OTOH, is supposed to bring unique leadership and vision to his company. He is supposed drive the business strategy. Some guy in Europe may not know all the nuances of how our business works. > Also you don’t outsource one fucking guy. I disagree. With my current company, I am very much involved with the core business. In addition, I manage a team, most of which are in India. These people are also involved in the core business. I provide quality control, training, managing to this team plus I am also the face of the company with clients even if someone in India worked on it. I was told a few years ago…‘I don’t think we (our company) will hire an American again except in your role’. What this means is that an American cannot get experience in what I do with this company. If all companies did this, then someone like me could not exist in the future…because they couldn’t get the experience to do it. By then, people from India will be perfectly fine doing my job and communications will likely be better that face-to-face is not as important. That being said…why stop? IS the CEO SOOOOO important that they need to be paid so much? I don’t think so. I’m sure there are extremely qualified Poles, Germans, Indians etc out there that would do a damn fine job as CEO and other upper management. So why stop? The reason, I suspect, is that companies exist not just to make money for their investors, but to provide good jobs and good income to upper management. Someone in upper management isn’t going to sit at his desk and think/say “Hmmmmm…you know we could lay me off and hire a bright Indian for one tenth the money…yes…that is what we should do” Now, I’m being simplistic…but it still applies. Upper management types would find it completely stupid to outsource THEM. WHy…they are IMPORTANT! What a silly idea. However, I again ask why not? If not the CEO…then what about the CFO? Surely he doesn’t need to be a highly paid American. I’m sure there are plenty of qualified people that could CFO anywhere in the world. If it’s so important that CFO be American…why not other positions? It is just a matter of perspective and point of view. COuld I be wrong? Sure…maybe upper management needs to be extremely highly paid Americans. However, let’s continue with the outsourcing trend and see if it works. Soon whole American corporations can be run cheaply staffed with all outsourced personnel. The same reasons that outsourcing is really a good thing in the long run could very well apply to upper management as well. ---
**Author:** ![Ruminator](https://avatars.discourse-cdn.com/v4/letter/r/b9bd4f/32.png) [@Ruminator](https://boards.straightdope.com/u/Ruminator)\ **Post date:** [June 25, 2009, 9:12pm UTC](https://boards.straightdope.com/t/why-are-us-ceos-so-grossly-overpaid/499562/76 "2009-06-25T21:12:39Z")
> [@BlinkingDuck](#): > > The reason, I suspect, is that companies exist not just to make money for their investors, but to provide good jobs and good income to upper management. Companies exist to provide good jobs & income to upper management. That’s upside down backwards ass reasoning. That’s like saying my house exists to give plumbers, firemen, carpet cleaners a good job. If companies want to have a chance at making money for their investors, they have to attract the caliber of management talent to run the company. The amount of money required to attract those people happen to be high. You can’t reason backwards and look at the high salaries first and then conclude that’s why the companies exist. ---
**Author:** ![BlinkingDuck](https://avatars.discourse-cdn.com/v4/letter/b/eada6e/32.png) [@BlinkingDuck](https://boards.straightdope.com/u/BlinkingDuck)\ **Post date:** [June 25, 2009, 9:24pm UTC](https://boards.straightdope.com/t/why-are-us-ceos-so-grossly-overpaid/499562/77 "2009-06-25T21:24:10Z")
> [@Ruminator](#): > > Companies exist to provide good jobs & income to upper management. > > That’s upside down backwards ass reasoning. > > That’s like saying my house exists to give plumbers, firemen, carpet cleaners a good job. > > If companies want to have a chance at making money for their investors, they have to attract the caliber of management talent to run the company. The amount of money required to attract those people happen to be high. You can’t reason backwards and look at the high salaries first and then conclude that’s why the companies exist. Really? What about the people making the product? Don’t they need to be high quality as well? Don’t they need to be paid well as well? No? Then why not management talent? I’m not saying you are wrong…I’m just saying we should give it a try. We won’t…because the people making the outsourcing decision will never apply it to themselves…but it should be tried. If it works, it’s a win for everyone, right? Same as outsourcing. ---
**Author:** ![Ruminator](https://avatars.discourse-cdn.com/v4/letter/r/b9bd4f/32.png) [@Ruminator](https://boards.straightdope.com/u/Ruminator)\ **Post date:** [June 25, 2009, 9:44pm UTC](https://boards.straightdope.com/t/why-are-us-ceos-so-grossly-overpaid/499562/78 "2009-06-25T21:44:17Z")
> [@BlinkingDuck](#): > > What about the people making the product? Don’t they need to be high quality as well? Don’t they need to be paid well as well? They need to be high quality but they don’t need to be paid as well because they are not as RARE as CEO caliber people. > [@BlinkingDuck](#): > > No? Then why not management talent? For example, consider google founders Larry Page & Sergey Brin. In 2001, Larry and Sergey could have saved a TON of money if they just plucked a cashier supervisor from Wal-Mart to be their CEO and run their company. But they are not stupid, they knew they needed the talent of someone that could handle the responsibilities. Eric Schmidt was one of the few and rare people to do it. Eric Schmidt is very intelligent. Eric Schmidt does not come cheap. Eric is going to cost a lot more than $5.00-an-hour. Your previous statement is saying that google exists so that Eric can have a high paying job. That’s backwards analysis. The people that complain about upper management being useless Dilberts are the ones that don’t run a real company; and it’s one reason why they’ll never have a big successful company – they don’t recognize the need for expensive managers like Eric Schmidt. ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [June 25, 2009, 9:56pm UTC](https://boards.straightdope.com/t/why-are-us-ceos-so-grossly-overpaid/499562/79 "2009-06-25T21:56:19Z")
> [@Ruminator](#): > > The implied sainthood of the poor always amuse me. > > Corporate big wigs do not have exclusive monopoly on propriety, modesty & shame. Trailer park residents and middle-class suburbanites are all looking out for themselves. Let’s get real here. > > If CEOs are grossly overpaid, that means everyone in the chain all the way down to the line worker is overpaid. Nobody holds a gun to anyone’s head to force a particular salary. Salaries are negotiated and can be refused by the employer or employee. There is a pretty big difference between the bargaining power a line worker has and the bargaining power a CEO has. The line worker doesn’t get to bargain unless they have collective bargaining in the form of unions while the CEO gets to bargain with his colleagues (many of whom either work for him or are CEOs themselves). ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [June 25, 2009, 9:58pm UTC](https://boards.straightdope.com/t/why-are-us-ceos-so-grossly-overpaid/499562/80 "2009-06-25T21:58:42Z")
> [@Labrador\_Deceiver](#): > > What you say may be true in some instances, but it is far from universal. There are many companies where the CEO & Board are at each others’ throats. And those don’t typically have the sort of oversized CEO salaries we are talking about and if they do it is because of a contrct that was signed bfore they had a falling out. [Previous page](https://boards.straightdope.com/t/why-are-us-ceos-so-grossly-overpaid/499562.md?page=3) [Next page](https://boards.straightdope.com/t/why-are-us-ceos-so-grossly-overpaid/499562.md?page=5)