anyone else bugged about CEO pay?

[MichaelB]

Aside from the bad/criminal examples, they always seem to fall back on 'competitive wages' - is that real or self-fulfilling prophecy, I really don't know but I want to believe the latter. It's hard to fathom how they could collectively be worth 9 figure or more incomes, especially hearing of examples of other multinational CEOs from other countries who don't pay themselves nearly as much, Japan comes to mind. However, corporate compensation abuses are not limited to the USA either from what I've read over the years.

The compensation committee of a board recommends that the CEO be paid "above average" or "in the top quartile". If all the boards do that, it means every CEO is paid above average. We know that is not possible, the result is a spiral upwards that never ends. Because the companies do not all use the same measures to compare and judge their results, they all can be "above average" in some way. Because the person getting paid is the one that hires the board members and compensation consultants, he/she can stack the deck and reward the effort, and they clearly do.

The real telling signs were things like backdating options and such. No clearer sign of ethical breach and real intent.

 

[eytonxav]

The compensation committee of a board recommends that the CEO be paid "above average" or "in the top quartile". If all the boards do that, it means every CEO is paid above average. We know that is not possible, the result is a spiral upwards that never ends. Because the companies do not all use the same measures to compare and judge their results, they all can be "above average" in some way. Because the person getting paid is the one that hires the board members and compensation consultants, he/she can stack the deck and reward the effort, and they clearly do.

The real telling signs were things like backdating options and such. No clearer sign of ethical breach and real intent.

I believe firmly in pay for performance, but these hand picked compensation committees really hand me a laugh. If they ever truely put together a set of "stretch" objectives that a CEO had to hit to achieve the big payout, it would be fine in my mind, but in reality most of these end up being no-brainer objectives that can easily be exceeded. Compare that against performance plans for middle management employees that require an employee to literally walk on water to get a top rating. It really seems that top execs are now in a class to be the only ones in a company that are motivated by more compensation, as its becoming more of an impossible dream for many other workers to tap into that same motivation and see it bare fruit.

 

[rodi]

I read an interesting article about how CEO got so highly compensated.
Boards of Directors determine the pay. They look at average/mean/median CEO pay in their sector. They do not want to admit that their guy, their CEO, is less than average - so they pay above average... and the average starts shifting up.

I work for a megacorp who's CEO has made the Forbe's top 10 most compensated. He did pretty darn good last year. He has yet to have a profitable year. But he still makes lots and lots of money.
He's going to be sitting very pretty when our impending buyout happens. Like over $100M.
Did I mention that my megacorp has not had a profit since he took over. (My sector is profitable... but not enough to make up the shortfall of the other groups.) Yet he makes 10's of millions - and even more this year....

 

[clifp]

I work for a megacorp who's CEO has made the Forbe's top 10 most compensated. He did pretty darn good last year. He has yet to have a profitable year. But he still makes lots and lots of money.
He's going to be sitting very pretty when our impending buyout happens. Like over $100M.
Did I mention that my megacorp has not had a profit since he took over. (My sector is profitable... but not enough to make up the shortfall of the other groups.) Yet he makes 10's of millions - and even more this year....

I am ok with a CEO making tens of millions a year but only if the shareholders are also benefiting. There are times that a CEO can take over a money losing company and turn things around by losing less money and see the stock price rise. But in general shareholders don't make money by holding on to shares of unprofitable companies. I see no reason a CEO of an unprofitable firm should make more than a couple of million a year.

I have given up on the board of directors doing anything about this so I think it is ultimately shareholders who need to scream about the excess pay.

 

[Midpack]

Someone else already mentioned it, but this might be interesting Citi's Pandit Sued Over Excessive Compensation - Forbes