Bestbank Tiger
Deity
Exactly.
As noted earlier, European executives make far less. So if there were a free market at work, the CEO jobs would be outsourced to Europe, Japan, India, etc. What we're seeing is cronyism.
Ridiculously Paid CEOs: Part of Capitalism or Aberration?
- Thread starter Defiant47
- Start date
Exactly.
As noted earlier, European executives make far less. So if there were a free market at work, the CEO jobs would be outsourced to Europe, Japan, India, etc. What we're seeing is cronyism.
CIVPhilzilla
Reagan Republican
Good CEOs bring much more value to their company than their salaries. If they are bad, the shareholders will vote either directly or by dumping the stock.
Irish Caesar
Yellow Jacket
I think the CEO salary, much like the salary of any worker, should be determined by market conditions. However, I am highly skeptical that those are behind obscenely high wages, bonuses, and severance packages we see today. I don't study much business, but I have a nasty feeling that government policy favorable to larger corporations tends to mean some execs are playing with an unfair advantage...
When the government allows well-run businesses to succeed, but won't allow poorly-run businesses to fail, we're not exactly dealing with an idealized system; if we let a few colossi tumble, perhaps we'll see a period of more reasonable executive pay.
But who am I kidding? Thinking long-term is silly!
When the government allows well-run businesses to succeed, but won't allow poorly-run businesses to fail, we're not exactly dealing with an idealized system; if we let a few colossi tumble, perhaps we'll see a period of more reasonable executive pay.
But who am I kidding? Thinking long-term is silly!
Lockesdonkey
Liberal Jihadist
They have every incentive, however, to hire a CEO who at first seems good, but is in fact a poor judge of risk who puts the company into a situation where it makes lots of money for a few years and then crashes and burns. Both short-sighted and far-sighted Board members have a reason do so: the short-sighted ones don't realize that the crash is coming, and the far-sighted ones trust that they'll be able to pull out before disaster strikes. Meanwhile, the great mass of investors has no clue what's going on.
Stormbringer
The Brick and The Rose
I'm not sure I buy that... The first argument is that some Board members are simply stupid, which is true. But then its not an incentive, its stupidity, and I am all for having good Board members. As for the long term intensives, the Board members have much more incentive to hire a good CEO that will actually make the value of their stocks keep going up and up and up, instead of crashing at some point where they "may" get out in time.
Mise
isle of lucy
There are many, many structural, systematic problems with CEO pay. The biggest for me is the problem of measurement - how do you measure a CEO's success? It's almost impossible to determine what effect a CEO has on the business, let alone what the opportunity cost of that CEO is.
If they make the best/cheapest product then the CEO is probably doing a fine job, wouldn't you say?
I'm sometimes frustrated that free market principles don't really operate at the CEO level. I like the free market theory, and it's frustrating to see it abused.
http://www.famoustexans.com/rossperot.htm
As the single biggest individual shareholder and member of the board of directors, Ross Perot wasn't able to stop GMs long decline while it was just gaining momentum. And very few board members stand up like he did.
Stormbringer
The Brick and The Rose
I don't think I understand the part of my argument that you disagree with. Obviously the GM Board Members were not doing a very good job, or the CEOs over time were not doing a very good job and the Board did nothing about it. But considering most of them own a lot of stock which is today near worthless they most certainly had to pay the price for it.
Further, it is important to note that very often CEO compensation is in the form of stocks or stock options, which are only good if the stock of the company goes up. In some cases these options can't even be activated before two or three years down the line, so the company has to perform well in the future as well as currently for the CEO to make a lot of money. Which I think is absolutely fair.
Again, I am not denying that there have been plenty of abuses and aberrations over time, but in general the free market works, and I don't see any other better way to determine compensation.
Further, it is important to note that very often CEO compensation is in the form of stocks or stock options, which are only good if the stock of the company goes up. In some cases these options can't even be activated before two or three years down the line, so the company has to perform well in the future as well as currently for the CEO to make a lot of money. Which I think is absolutely fair.
Again, I am not denying that there have been plenty of abuses and aberrations over time, but in general the free market works, and I don't see any other better way to determine compensation.
Options are good, even if the price is going down, if you get them for free. That happens all the time.
CaptainF
The Professional Poster
It's so good to know that I can get rich by doing a crappy job after all. Who says working hard meant anything? 
Masquerouge
Deity
But it's not how it works in reality. In reality, shareholders are other big companies, and they extremely rarely vote a salary down or dump the stock. CEOs mostly resign when media outrage is high enough. And then they get their golden parachute, which is certainly another wonder of the free market at work.
But you aren't understanding my (or anyone elses point), which is that CEOs are picking their own compensation plan, and not getting it through negotiations with the owners of the company. And it is largely independent of performance, at least in the short run.
There is no "free market", where the best executives are on the market to the highest bidder, and are held accountable for their performance. Executives get those salaries and bonuses because the owners of the companies are not a part of the decision making process. otherwise I cannot believe that people would get paid that much. They get paid that much because they are writing their own ticket with the collusion of boards that they have a lot of the power to nominate.
Ace of Gold
MAKE WAY FOR THE BAD GUY
CEO's deserve the large sums of money.
These CEO's you guys are talking about, that make tons of cash. Those sums paid to the CEO are a pittance that barely effects the bottom line at these places. In a year like 2008, these companies lost hundreds of $ billions. $20mill to the CEO on his way out aint sht to be concerned about - unless you are employed there, then you might be upset.
Cheezy the Wiz
Socialist In A Hurry
Why? They contribute no more to the success of a company than anyone else does.
Ayatollah So
the spoof'll set you free
To the OP: Yes. Both. It's an aberration, and it's part of capitalism. Capitalism = caveat emptor, and the CEOs are doing a good job of "emptoring" out the pockets of the corporations they run. American corporate culture is aberrant, however, so it's also an aberration.
Quoted for truth.
Quoted for truth.
jeps
Arcadefire
idea: steve jobs it. pay them $1/year and TONS of stock options. this means that they NEED the company to do well or their stocks are worthless.
A lot of executive compensation is already in stock.
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