CEO pay

#51
#51
Vols520 said:
Just saying I personally wouldn't need 50 mill. Maybe some are deserving, but I would guess most aren't.
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That is a baseless moral judgement. It is no different than an evangelical saying that homosexuals are going to hell.
 
#53
#53
Vols520 said:
Just saying I personally wouldn't need 50 mill. Maybe some are deserving, but I would guess most aren't.
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why are you the arbiter of what someone is worth? You aren't paying the guy/gal.

what's wrong with letting the buyer determine what they are willing to pay?
 
#56
#56
I had a simila discussion with a buddy a couple weeks ago. I didn't then, and stil don't now, understand his argument.

he argued that CEOs, and companies generally, should be focused less on making shareholders money and focused more on making their employees happy. in essence, the role of the corporation should be to serve its employees rather than its shareholders.

I just said, no ones stopping you from starting a corporation with that philosophy. good luck with it
 
#57
#57
dreVol said:
I had a simila discussion with a buddy a couple weeks ago. I didn't then, and stil don't now, understand his argument.

he argued that CEOs, and companies generally, should be focused less on making shareholders money and focused more on making their employees happy. in essence, the role of the corporation should be to serve its employees rather than its shareholders.

I just said, no ones stopping you from starting a corporation with that philosophy. good luck with it
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I think it is a good philosophy for a smaller company with no intention to become public. If your employees are happy, your customers are generally happy as well.
 
#59
#59
dreVol said:
I had a simila discussion with a buddy a couple weeks ago. I didn't then, and stil don't now, understand his argument.

he argued that CEOs, and companies generally, should be focused less on making shareholders money and focused more on making their employees happy. in essence, the role of the corporation should be to serve its employees rather than its shareholders.

I just said, no ones stopping you from starting a corporation with that philosophy. good luck with it
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Actually, research shows that making employees happy is highly correlated with making share holders money. Same with satisfying customers. It's a big feedback loop - satisfied customers improve the job satisfaction of employees which improves their work output leading to more satisfied customers.

More satisfied and loyal customers has a tremendous impact on profitability and thus share holder wealth.

That said, it doesn't preclude paying the CEO any particular salary.

Finally, you are 100% right. Owners can choose to run their company anyway they like. If they want to use the Ben and Jerry's model that's fine.
 
#60
#60
Lexvol said:
I think it is a good philosophy for a smaller company with no intention to become public. If your employees are happy, your customers are generally happy as well.
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You said it more succinctly than I did but I think it can work for large public companies as well - provided the shareholders buy in.
 
#61
#61
volinbham said:
You said it more succinctly than I did but I think it can work for large public companies as well - provided the shareholders buy in.
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I agree...but I would guess the more decision makers you have the harder it gets.
 
#63
#63
A question for those who think CEOs are overpaid.

What should be the max pay for middle managers such as Derek Dooley and Nick Saban?

200K?
 
#64
#64
1) I agree with everyone posting that this is not a government issue, with the exception I would also agree of those receiving TARP funds. I think a company that takes taxpayer money like that can rightfully be required to cut executive pay until the ship is righted. And so once paid back, I'd say those limits should end. (I suppose a thornier issue is what about a co0mpany that gets any sort of subsidy from the U.S. government -- can't we make the same argument that they should be limited?)

2) The real problem, imo, is the culture of CEOs and their boards being too cozy. I think most boards understand that they have a fiduciary duty to the stockholders to be responsible with executive pay. But I also think that over time it has become an accepted premise that enormous bonuses are appropriate, and that is just feeding on itself. If anything, the disparity is going to get worse.

3) The real fault here is with the stockholders. But so much of these companies are held now in mutual funds and institutions that simply don;t have it as part of their function to cry foul when an exec gets some nutty bonus. Last year, just to play around with it, I bought 20 shares of Citigroup on one of the trader websites. What am I gonna do with my $200 stake in a $900 billion company if I'm pissed at an exec's bonus?

I'd like to see some of these large cap companies be more responsible with the exec compensation issue. But its not a government issue. And the stockholders are either too weak or don;t care enough to complain.
 
#65
#65
lawgator1 said:
1) I agree with everyone posting that this is not a government issue, with the exception I would also agree of those receiving TARP funds. I think a company that takes taxpayer money like that can rightfully be required to cut executive pay until the ship is righted. And so once paid back, I'd say those limits should end. (I suppose a thornier issue is what about a co0mpany that gets any sort of subsidy from the U.S. government -- can't we make the same argument that they should be limited?)

2) The real problem, imo, is the culture of CEOs and their boards being too cozy. I think most boards understand that they have a fiduciary duty to the stockholders to be responsible with executive pay. But I also think that over time it has become an accepted premise that enormous bonuses are appropriate, and that is just feeding on itself. If anything, the disparity is going to get worse.

3) The real fault here is with the stockholders. But so much of these companies are held now in mutual funds and institutions that simply don;t have it as part of their function to cry foul when an exec gets some nutty bonus. Last year, just to play around with it, I bought 20 shares of Citigroup on one of the trader websites. What am I gonna do with my $200 stake in a $900 billion company if I'm pissed at an exec's bonus?

I'd like to see some of these large cap companies be more responsible with the exec compensation issue. But its not a government issue. And the stockholders are either too weak or don;t care enough to complain.
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I don't think that is entirely unreasonable.

Consumption/consumers are the only thing that hits those "cozy" relationships where it counts.
 
#67
#67
volved said:
A question for those who think CEOs are overpaid.

What should be the max pay for middle managers such as Derek Dooley and Nick Saban?

200K?
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I would say that it's different because they don't work for money-making enterprises, but ... well, you know.
 
#68
#68
volinbham said:
1) the primary difference is observability of performance. No one would disagree that Steve Jobs is one of the great CEOs of all times but what are his stats?

2) building on #1 above, say a company loses money - was the CEO bad? How do we know (looking from the outside)? If a team loses games did the high paid athlete suck? If a movie bombs but the actor got $3 million for it did the actor suck?

3) athletes and actors are replaceable - look at the Lin kid in NY. A nobody, no name, who was cut by two other teams given a chance and is now an up and comer. The supply/demand thing works with athletes and actors too.

4) Minimum athlete salaries are astronomical. Have a couple decent years, get a good contract and you are paid in the millions - are you really worth it in terms of bringing money to the organization?

CEOs are scrutinized more because people don't observe what they do and how their performance impacts an organization.
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1. Notice I never said all CEO pay doesn't make sense. Steve Jobs, Warren Buffett, Jack Welch, etc...are generally worth the money. Back to the link I posted, what is your opinion of the market forces at work there? From my seat it makes absolutely no sense.

2. The converse is true as well. Say the company makes huge amounts of money. Was it because of the CEO performance alone? How much did he really have to do with it on the ground level? He answers to the BoD and addressess shareholder value. He didn't come up with the product or service, how it is produced or distributed, or daily operations that is actually raking the money in.

3. Peyton Manning is a great example here. How did the Colts do this season? You don't think he was worth every penny, or he could have been replaced by anybody? Supply and demand are much more directly in play with actors and athletes. They are showing producable results directly attributed back to specifically how they are performing and contributing.

4. Generally speaking, yes. Take Lin, he is putting fans in the seats. He is worth every penny, probalby more. It is also worth noting that the really great CEO's (Jobs, Buffett, etc) have generally been at the company from the beginning and have working knowledge what it takes at the trench level to make it work.
 
#69
#69
lawgator1 said:
1) I agree with everyone posting that this is not a government issue, with the exception I would also agree of those receiving TARP funds. I think a company that takes taxpayer money like that can rightfully be required to cut executive pay until the ship is righted. And so once paid back, I'd say those limits should end. (I suppose a thornier issue is what about a co0mpany that gets any sort of subsidy from the U.S. government -- can't we make the same argument that they should be limited?)

2) The real problem, imo, is the culture of CEOs and their boards being too cozy. I think most boards understand that they have a fiduciary duty to the stockholders to be responsible with executive pay. But I also think that over time it has become an accepted premise that enormous bonuses are appropriate, and that is just feeding on itself. If anything, the disparity is going to get worse.

3) The real fault here is with the stockholders. But so much of these companies are held now in mutual funds and institutions that simply don;t have it as part of their function to cry foul when an exec gets some nutty bonus. Last year, just to play around with it, I bought 20 shares of Citigroup on one of the trader websites. What am I gonna do with my $200 stake in a $900 billion company if I'm pissed at an exec's bonus?

I'd like to see some of these large cap companies be more responsible with the exec compensation issue. But its not a government issue. And the stockholders are either too weak or don;t care enough to complain.
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Oh cool, so you agree that GM shouldnt be handing out $7K bonuses to its workers that they announced today

GM books record annual profit; union workers due $7,000

GM also said Thursday that its 47,500 blue-collar workers in the U.S. will get $7,000 profit-sharing checks in March. The checks are based on North American performance and are a record for the company.
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The U.S. government still owns 26.5% of the company and is waiting for the share price to rise before selling in an effort to recoup its bailout money.
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#70
#70
nbakerld said:
What makes it inefficient? Market failure is defined as an outcome where there exists another conceivable outcome where a market participant may be made better-off without making someone else worse-off. This isn't even a question of market failure.

We are at market equilibrium, unless you think there is a shortage of CEOs.
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As OP said, I don't think there's a shortage of CEO's. Yes, it's a difficult job and takes a high level skill set, but they aren't as scarce as A-list actors or basketball all-stars, even compared with the number of openings.

Specifically, I think CEO compensation had an indirect but highly important role in creating the recession of 2008.

To answer the OP, skyrocketing CEO salaries have coincided with the trend, starting in the 80's, to make CEOs more responsive to shareholders by tying their fates together through compensating the CEO with restricted stock and options.

Ideally, a stock price is, at its core, a price signal indicating how a company is doing at any given time. I think this scheme works fairly well with companies that run with little debt and create something of intrinsic value, such as Apple or BP. Creating value for the shareholder in these cases coincides with making the company perform better.

But, the downside is cases where you've got an Enron. The CEO, now compelled not only by the board, but by his own paycheck to make sure the stock price stays high can resort to cooking the books, perpetrating fraud, etc. Ten or so years ago, when that went down, the perps were prosecuted. In Wall Street firms and banks, however, this resulted in everybody levering up their equity capital to levels of thirty or forty to one, taking highly excessive risk and nearly blowing up our economy. In short, driving up short term stock prices outweighs a sustainable business plan.

So, sometimes it works with institutions that I mentioned earlier such as Apple, BP, et al, but in other cases, like banks (the top ten of which are all still too big to fail, and will have to get another bailout if/when another bubble bursts), a dangerous conflict of interest can be created.
 
#71
#71
are you arguin that p/e firms that restructure companies worth dog crap into profitable enterprises shouldn't be rewarded b/c they weren't there long enough?
 
#73
#73
dreVol said:
are you arguin that p/e firms that restructure companies worth dog crap into profitable enterprises shouldn't be rewarded b/c they weren't there long enough?
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Is this directed at me because of my comment that generally speaking the really good CEOs have been at the companies for a long time?

Not sure how your question applies.
 
#74
#74
#75
#75
lawgator1 said:
I would say that it's different because they don't work for money-making enterprises, but ... well, you know.
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Well, actually I don't know.

It seems a "money-making enterprise" would be more likely to compensate with money those who make the money for the enterprise than a public institution whose primary purpose is education.

Was your comment supposed to make sense?
 
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