Why Are US CEOs so Grossly Overpaid?

[Ruminator]

@Damuri_Ajashi

There is a pretty big difference between the bargaining power a line worker has and the bargaining power a CEO has.

That’s funny, I think I have the same or better bargaining power as any CEO. I guess I’m just deluding myself.

[BlinkingDuck]

@Ruminator

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.

This is a straw man.

I’m sure there are well qualified non-Americans out there willing to work for 1 mill a year…that would do a good job where the Americans are currently geting 20 mill a year.

I’m not talking about peasants here. I’m talking about very smart, educated foreign people with experience running companies.

It should be tried. If outsourcing is a ‘good thing’…don’t stop. Keep going up the chain and outsource upper management.

[Damuri_Ajashi]

@cmosdes

Or the inverse, if you are making the company millions they would be crazy not to give you a fare portion of that.

What is fair?

And how do you attribute the profitability of a multinational multi billion dollar company with hundreds of thousands of employees to one person?

Environmental factors have a much bigger influence than the CEO in many cases.

[Ruminator]

@BlinkingDuck

I’m sure there are well qualified non-Americans out there willing to work for 1 mill a year…that would do a good job where the Americans are currently geting 20 mill a year.

I’m not talking about peasants here. I’m talking about very smart, educated foreign people with experience running companies. However, he realizes that he can’t get (or keep) quality managers for cheap.

Warren Buffet is notorious for looking for cheap companies and the ultimate bargain hunter.

One of the possible successors for Berkshire Hathaway is a CEO in India Ajit Jain. Mr. Ajit Jain does not come cheap. He’s as expensive as any typical American CEO. Warren Buffet said he asked Ajit Jain’s parents if they had another son at home just like Ajit.

I don’t think outsourcing is the stumbling block. It’s finding quality people… period…regardles of where they live and how much they cost. American CEOs carry a premium at the moment but than can change over time. Smart investors are not deliberately choosing American CEOs over Indian ones over cost – if there were more Indian CEOs that crossed their path, they’d be running American companies. Japan (the Japanese) are the ultimate xenophobes … and yet they recruited a foreign CEO to run Sony. I don’t think investors are racially biased to save money.

[msmith537]

@Ruminator

Sony (Japan) has CEO 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.

That’s not “outsourcing” by the accepted business definition of the term. That is hiring some foreign guy to be the CEO of your multinational corporation.

@BlinkingDuck

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’.

Which part are you disagreeing with? Because it sounds like you are echoing what I said.

You provide the strategic direction and guidance for your group. You are the face the client sees. How the work actually gets done is a black box as far as the client is concerned.

Ask yourself why they don’t want to outsource you. What is the need to have your physical presence in the USA?

@Ruminator

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.

Um…if you outsource the entire company to some other country, that’s called a “foreign company”. And it’s the reason the steel, shipping, automotive and other industries have all but disappeared from the US.
Companies do not exist to provide jobs for people. They exist to make money for the people who create and invest in them. I mean theoretically you could have a company that just consists of one CEO in his office in New York. The product is manufactured in China, sold through call centers in India and shipped via some international shipping company. The only reason it’s an “American” company is because the dude just happened to live here when he created his idea.
Now that said, let’s not pretend that every Vice President and CEO is worth their weight in gold. My last job I was working in a large insurance company and I had two VPs in the year I was there. The first was a raging psycho-bitch and the second was just some guy I saw once every few months. These are just people who happened to stick with the company 15 and 30 years and just kept getting promoted to higher levels of the beurocracy. They weren’t particularly good managers or leaders.

[Ruminator]

@Damuri_Ajashi

And how do you attribute the profitability of a multinational multi billion dollar company with hundreds of thousands of employees to one person?

Environmental factors have a much bigger influence than the CEO in many cases.

It’s irrelevant to think in terms of “attributing” the % of revenue to the CEO. The CEO’s salary is simply what it took to hire the CEO.

If you make $50000 a year and you pay your babysitter $5000 a year to watch your child, does that mean you can attribute 10% of the reason you were able to earn $50,000 (revenue) was due to the talents of the babysitter? That’s ridiculous and backwards reasoning! You simply paid the babysitter $5000 because that happens to be the market wage for older teenagers to watch your child.

[Damuri_Ajashi]

@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. [bold]The amount of money required to attract those people happen to be high.[/bold] You can’t reason backwards and look at the high salaries first and then conclude that’s why the companies exist.

OK and why is the amount required to attract those people so much HIGHER in America than in Europe and Asia?

[Ruminator]

@msmith537

That’s not “outsourcing” by the accepted business definition of the term. That is hiring some foreign guy to be the CEO of your multinational corporation.

It was sarcasm.

But… I could certainly see where some traditional Japanese workers at Sony would “feel” like they “outsourced” their CEO position — instead of promoting a veteran from within.

[cmkeller]

On the other hand…
Jeff Bezos makes approximately $81,840 per year.

“Other companies that hired a CEO also compensated him with…”

[BrainGlutton]

@Fotheringay-Phipps

My assumption that they are is based on the fact that by comparison with European and Asian CEOs, they are paid significantly more, for performing what are presumably the same functions.

I would guess that at least part of the problem is that the boards of these companies makes these decisions, playing with other people’s money, and also because a large portion of their compensation is in the form of stock options, which are effectively the same as a tax on the shares of current shareholders (since their value becomes diluted) but which are not nearly as blatant as direct payouts.

But, is that any different in European and Asian corporations?

[msmith537]

@Ruminator

It was sarcasm.

But… I could certainly see where some traditional Japanese workers at Sony would “feel” like they “outsourced” their CEO position — instead of promoting a veteran from within.

They would probably feel dishonored that a dirty gaijin barbarian was running their company.
I think most of the reason US CEOs are so overpayed compared to European and Japanese CEOs is cultural. Here is the US, we have much more of a sense of accomplishment being do to one’s individual effort. There is much more of a “superstar” mindset.