anyone else bugged about CEO pay?

[ItDontMeanAThing]

However there have certainly been plenty of examples of complete rip-offs. Kind of like some NFL first round draft picks!

By what possible definition is that a rip-off? The team conducts a medical exam, measures his performance in things like the 40 yard dash and has scores of hours of video of his past performance to review. The team makes an offer based on what they expect the drafted player will do in the NFL. Then they pay him according to contract, regardless of his performance.

How does this differ from hiring a CEO? The BOD interviews, looks at past performance, talks to others who have inside info on how he leads a company. Wouldn't surprise me if they asked for a full physical exam, including peeing in a cup, but don't know about that. Once the BOD finishes their evaluation they make an offer. If the CEO drives the company into the red, was it a rip-off? Nope. It was bad judgment or bad luck by the board. And the CEO gets paid according to his contract.

The original question if one was bugged by CEO pay. No, I'm not. That's because I completed the government program that was designed to end class envy by teaching the common people to tolerate those who are smarter, more motivated, better learners, consistently able to see where an industry will be in three years, more adept in the politics of organizations, and better able to do strategic and tactical planning based on incomplete information when the company's very existence is on the line all while sacrificing anything resembling a normal family life. Can't we all just get along?

 

[NW-Bound]

How does this differ from hiring a CEO? The BOD interviews, looks at past performance, talks to others who have inside info on how he leads a company. Wouldn't surprise me if they asked for a full physical exam, including peeing in a cup, but don't know about that. Once the BOD finishes their evaluation they make an offer. If the CEO drives the company into the red, was it a rip-off? Nope. It was bad judgment or bad luck by the board. And the CEO gets paid according to his contract.

In theory, that's how it is supposed to work, yes.

The original question if one was bugged by CEO pay. No, I'm not. That's because I completed the government program that was designed to end class envy by teaching the common people to tolerate those who are smarter, more motivated, better learners, consistently able to see where an industry will be in three years, more adept in the politics of organizations, and better able to do strategic and tactical planning based on incomplete information when the company's very existence is on the line all while sacrificing anything resembling a normal family life. Can't we all just get along?

It is not class envy!

There have been plenty of articles and books describing how many CEOs of financial companies had absolutely no ideas of what the CDOs and CDSs really meant. All they knew was that it brought lots of profits (while it lasted of course), so that they could claim credits and made lots of money on their stock options.

Of course the public at large had to get along. How many billions have we spent to bail them out?

From my vantage point, I will say that most CEOs who make low millions and are producing good value for their companies would be in a respectable pay range, given what they have to do. When their pay goes into 9-10 figures, that is a different story.

Thank you for the post!

 

[RockyMtn]

I wasn't bugged about it when I was a CEO. Now I am outraged!!!!

 

[Mulligan]

I wasn't bugged about it when I was a CEO. Now I am outraged!!!!

Maybe, I am the oddball, but that is a great quote!

 

[Texas Proud]

I'm considered to be CEO of a major division of our group (around $3B revenues under my purview). I'm not the group CEO. I will testify that it is not all peaches n cream, neither at my puny level of CEOship or at my boss's. We won't go into the details too much, but I see what he goes thru, and I don't think I would be willing to accept his CEO job even for the package he makes (very low 7 figures).

Someone here asked why CEOs were sometimes paid in stock rather than having them buy their own. The answer here is simple: diversification. One element of my pay is restricted stock. But I never keep more than 3-5%. It's not that I don't believe in the company. It's simply that I cannot have my career and the bulk of my "fortune" in the same basket. One of my former CEOs told me to watch out for that. So I keep a few percent of my holdings in the company and the rest is diversified.

From my vantage point, I will say that most CEOs who make low millions and are producing good value for their companies would be in a respectable pay range, given what they have to do. When their pay goes into 9-10 figures, that is a different story.

R

I would say that your position is not the same as a CEO... yours is more of a title change... you could be called President of your division just as easily and is probably more correct... you had a boss that was not the BOD... you had a boss who had input into your compensation, including how many shares you received in grants or options... not the BOD.. (I am sure the BOD voted on your distribution, but only in a general way..... no discussion... heck, my 50 or so shares were voted on by the BOD along with 10s of thousands of other people's shares)...

IMO, there is only one CEO of a company... everbody else reports to him in one way or another... his boss is the BOD, nobody else... the BOD determines salary and options/grants...

 

[Rambler]

I would say that your position is not the same as a CEO... yours is more of a title change... you could be called President of your division just as easily and is probably more correct... you had a boss that was not the BOD... you had a boss who had input into your compensation, including how many shares you received in grants or options... not the BOD.. (I am sure the BOD voted on your distribution, but only in a general way..... no discussion... heck, my 50 or so shares were voted on by the BOD along with 10s of thousands of other people's shares)...

IMO, there is only one CEO of a company... everbody else reports to him in one way or another... his boss is the BOD, nobody else... the BOD determines salary and options/grants...

Fair enough on the CEO vs President comment. I'm ok with either, but sometimes the CEO title does open doors that need to be opened, and I'm allowed to use it. As you assess, my CEO boss does have input into my pay. But I know from personal experience that our Board is very involved in compensation matters at the CEO-1 level (me), including salary, STI and LTI, plus other T&Cs and conditions. My comp is irrelevant anyway. I was just trying to get across the point that CEOs have more bull pucky to deal with than yo can shake a stick at. I see my CEO and what he does, and while I don't say "no amount of money would get me to do...", I do say that I wouldnt want to do what he has to do to earn the extra. But, some people it does not bother. I prefer having a life, though meager, outside of work.

R

 

[MBAustin]

Well, I'll say it.

I'm bugged about my CEO's excessive pay. Before FIREing Feb 1, as a senior manager, I helped my MegaCorp's CEO off-shore IT jobs to less reliable and less competent resources in low cost countries. I released many talented US citizens to help boost our stock and fatten his pocket. Not only were there devastated employees and their families but our customers also suffered. I did everything I could to minimize the pain to both, however.

That pig of a CEO got a raise of almost 20% but allotted almost nothing to the remaining employees who had to pick up the pieces.


I'm glad to be retired after 10 years of downsizing.

+1
Been there, done that, no more.

 

[Texas Proud]

Fair enough on the CEO vs President comment. I'm ok with either, but sometimes the CEO title does open doors that need to be opened, and I'm allowed to use it. As you assess, my CEO boss does have input into my pay. But I know from personal experience that our Board is very involved in compensation matters at the CEO-1 level (me), including salary, STI and LTI, plus other T&Cs and conditions. My comp is irrelevant anyway. I was just trying to get across the point that CEOs have more bull pucky to deal with than yo can shake a stick at. I see my CEO and what he does, and while I don't say "no amount of money would get me to do...", I do say that I wouldnt want to do what he has to do to earn the extra. But, some people it does not bother. I prefer having a life, though meager, outside of work.

R

Since you are higher than most people in the pecking order... I hear what you say.... and think it carries more weight....


I remember reading an article on the high pay of a CEO... and it was along the same line that you are saying... that most people that are at your level look at it and would say "I am happy where I am if I am only going to get a 10% raise to do all that".... IOW, to get more people motivated to take on that position... you have to pay a lot more...


Also, most people don't calculate the 'down' time of some of the CEOs.... if you run a company into the ground you might not get another offer for a few years... so you have to cash in while you can.... kind of like a sports star who has a short career....

 

[haha]

Since you are higher than most people in the pecking order... I hear what you say.... and think it carries more weight....


I remember reading an article on the high pay of a CEO... and it was along the same line that you are saying... that most people that are at your level look at it and would say "I am happy where I am if I am only going to get a 10% raise to do all that".... IOW, to get more people motivated to take on that position... you have to pay a lot more...


Also, most people don't calculate the 'down' time of some of the CEOs.... if you run a company into the ground you might not get another offer for a few years... so you have to cash in while you can.... kind of like a sports star who has a short career....

These guys are like baseball managers. No matter how awful they are, they have 9 lives.

 

[Tadpole]

I just got an announcement of a Chevron meeting. For my proxy, they recommend that I vote in favor of all Board proposals and against all Stockholder proposals. I haven't read any of the proposals yet but, embedded in the titles for the Board (titles sound reasonable) is their proposal for executive officer compensation determination. Embedded in the stockholder proposals (titles sound anti-profit with some seeming silly) is a stockholder proposal for executive compensation.

Now let's be honest. I might agree with what I consider anti-profit and silly if I was a disinterested party. But I admit seeing these "silly" things does make me more leery of a stockholder's idea for setting compensation. If the stockholder's making the proposals aren't smart enough to factor in business considerations, why would I think they would factor in the need for good business executives?

Tis a dilemma since we all call for a say but I imagine that it is usually some nutty fringe that actually comes up with stockholder proposals.

 

[ItDontMeanAThing]

It is not class envy!

And denial is not a river in Egypt.

There have been plenty of articles and books describing how many CEOs of financial companies had absolutely no ideas of what the CDOs and CDSs really meant. All they knew was that it brought lots of profits (while it lasted of course), so that they could claim credits and made lots of money on their stock options.

Reread post #1. This thread is a bout CEOs, not CEOs of financial companies.

 

[clifp]

I understand the outrage over some CEO salaries, and by and large I think corporate democracy in the US is pretty badly broken. I.e. shareholder proposal like the Chevron one get ignored.

However, I am puzzled why is their such outrage over CEO salaries and not pro athletes, movie stars, rappers, or even lawyers.

If you take total compensation of the top 5 highest paid executive of the Fortune 500 and compared it to the total salary of all of the NFL, NBA, and Major League baseball players (rough 2700 players) you'll find that compensation is roughly the same. The executives get more money when you include stock and deferred comp, but the athlete make more in endorsement deals.

In the 1920s it is was a big deal when Babe Ruth first made more than President Coolidge. (Ruth quipped than he a better year than Coolidge). Now days the minimum salary for pro sports is much higher than the Presidents.

Do we really think the collective value of the folks who run our corporations is less than pro athletes?

 

[Independent]

I understand the outrage over some CEO salaries, and by and large I think corporate democracy in the US is pretty badly broken. I.e. shareholder proposal like the Chevron one get ignored.

However, I am puzzled why is their such outrage over CEO salaries and not pro athletes, movie stars, rappers, or even lawyers.

If you take total compensation of the top 5 highest paid executive of the Fortune 500 and compared it to the total salary of all of the NFL, NBA, and Major League baseball players (rough 2700 players) you'll find that compensation is roughly the same. The executives get more money when you include stock and deferred comp, but the athlete make more in endorsement deals.

In the 1920s it is was a big deal when Babe Ruth first made more than President Coolidge. (Ruth quipped than he a better year than Coolidge). Now days the minimum salary for pro sports is much higher than the Presidents.

Do we really think the collective value of the folks who run our corporations is less than pro athletes?

I'm not sure that I'm "outraged" by general CEO pay (though I am with respect to a few cases). But I'll bite on this.

In earlier posts I listed 5 reasons why the market for CEO compensation is inefficient. By my count, 4 of those reasons do not apply to athletes.

For example, athletes don't choose the people who determine their compensation, some CEO's do.

You're assuming the "outrage" is driven by simple dollars. For me the dollars aren't the issue. It's clearly an important job and should be well compensated if it's done well. The issue is how we get to those dollars. It seems to me that the market works pretty well for athletes, movie stars, and singers. I'm not so sure about lawyers.

(Other people will be "outraged" by CEO compensation due to the CEO's power. The thought that the CEO cashes in by firing thousands of people is simply offensive, they'd say that doesn't pass the common decency minimum. Again, athletes etc don't get bonuses for firing people.)

 

[Beryl]

Do we really think the collective value of the folks who run our corporations is less than pro athletes?

Please, tell me you do know the differences in how athletes like Payton Manning and CEOs like Sam Palmisano are compensated.

 

[ERD50]

(Other people will be "outraged" by CEO compensation due to the CEO's power. The thought that the CEO cashes in by firing thousands of people is simply offensive, they'd say that doesn't pass the common decency minimum. Again, athletes etc don't get bonuses for firing people.)

While I'm sometimes 'outraged' by CEO pay, for some of the reasons you mentioned, I don't think this one always applies.

For example, a new CEO comes into an ailing company, and sees that what the company needs to survive is layoff and cuts. And he streamlines and improves the organization and provides a clear vision so the company can truly 'do more with less'. Maybe the CEO is working 100 hour weeks to get these changes through and deal with the unsettling issues.

Yet, it can take years for this to play out and see if it was successful or not. I think that CEO should be able to demand serious compensation, even while laying off people.

-ERD50

 

[ziggy29]

Do we really think the collective value of the folks who run our corporations is less than pro athletes?

Then again, most of the time the performance of a pro athlete is very measurable. That's not so true for a CEO in most cases; sure, one could say that a company has been more profitable by $X million since a certain CEO took the helm, but that's only correlation and not proof of causation. To use the athlete analogy, just because a baseball team goes 8-2 in the 10 games after making a lineup change doesn't mean the guy who was added to the lineup is worth an exorbitant amount of money.

But with athletes, you have so many accepted statistics ("metrics" in the corporate world) by which to measure performance. Batting average, touchdown to interception ratios, yards per carry, points per game, all that sort of thing. There's no real way to measure CEOs that way, so that could be part of the problem. The individual metrics tell us that Peyton Manning is worth a LOT more than most other quarterbacks. The metrics can rarely tell us how a CEO is performing relative to his/her peers.

[Also -- how many people buy shirts and other paraphernalia for a company and its CEO compared to say, a football team and it's star quarterback or wide receiver? How much money does this bring in to the business? We may question a society which places such value on athletic performance, but that doesn't change the fact that a team pays someone many millions to throw a football or hit a baseball because they think the player will add at least that much to their bottom line. My only beef comes when these teams pay millions for someone and then plead poverty and demand a taxpayer-funded stadium.]

 

[Bestwifeever]

CEOs spend most of their careers working their way up to CEO (and most who start on that path will not finish as a CEO); professional athletes spend the first part of their careers earning their money and then they're done. Not much of an old boys network when it comes to the athletes--they either have it or they don't.

 

[clifp]

Then again, most of the time the performance of a pro athlete is very measurable. That's not so true for a CEO in most cases; sure, one could say that a company has been more profitable by $X million since a certain CEO took the helm, but that's only correlation and not proof of causation. To use the athlete analogy, just because a baseball team goes 8-2 in the 10 games after making a lineup change doesn't mean the guy who was added to the lineup is worth an exorbitant amount of money.

But with athletes, you have so many accepted statistics ("metrics" in the corporate world) by which to measure performance. Batting average, touchdown to interception ratios, yards per carry, points per game, all that sort of thing. There's no real way to measure CEOs that way, so that could be part of the problem. The individual metrics tell us that Peyton Manning is worth a LOT more than most other quarterbacks. The metrics can rarely tell us how a CEO is performing relative to his/her peers.

[Also -- how many people buy shirts and other paraphernalia for a company and its CEO compared to say, a football team and it's star quarterback or wide receiver? How much money does this bring in to the business? We may question a society which places such value on athletic performance, but that doesn't change the fact that a team pays someone many millions to throw a football or hit a baseball because they think the player will add at least that much to their bottom line. My only beef comes when these teams pay millions for someone and then plead poverty and demand a taxpayer-funded stadium.]

I agree that it is easier to measure the performance of an athlete than CEO, but I think that is in large part because teams are much smaller even football has less the 50 guys perhaps another dozen or so if you add coaches/trainers etc vs 100K+ "team mates" for Fortune 50 company.

Actually CEO and Athletes are paid in a pretty similar fashion they are contracts based on past performance and they get bonus passed on current. In fact typically CEO compensation is based more on current performance than an athlete.

Lets compare the pay and performance of IBM's CEO Sam Palmisano, and Alex Rodriquez. In 2010 the both earned almost exactly the same 31.7 million for Sam and 33 million for A Rod. I am not particularly convinced that being one of the top baseball players is worth more than being CEO of one of the top corporations.

I believe that A Rod made 32 million in 2009. In 2009 he hit .303 and had 30 Homers and and lead his team to a World Series victory. In 2010 A Rod hit .270 with 30 homers and the Yankees didn't win the pennant (thank god). It seems to me that Yankees paid ARod basically a million bucks per homer in 2010.

In 2009 Sam made $24.3 million. The stock was $130.90 and the company earned $10/share. In 2010 the stock was up to 146.76, total stock holder return was 14% just slightly below the S&P 500. The companies earnings increased from $10/share to $11.52 continuing a string of double digit earning growth under his leadership. I am sure if you cared to go through the SEC filings there is probably some details on what cash flow, earning growth, market share IBM need to achieve that Sam's compensation. Now you can argue that 30% increase in pay raise is excessive for just keeping up with S&P 500 and perhaps getting .2% of IBM earning is excessive. However, I am hard pressed to see why Sam's pay for performance is worse than A-Rod who got 3% raise for 11% less hits and generally a crappy year.

Clearly A-Rod sells more merchandise than Sam (who?) sells but that is obviously figured in his salary. Plus I know that A Rod gets way hotter woman than Sam and that has to be worth something

 

[jerome len]

what bugs me is the salary of professional baseball, basketball players.......movie stars, etc that make as much as CEO's that many times work 50 to 70 hour weeks, all year long.

But......that's what the market say's they are worth......I tell my kids, think about 5 jobs you would like to do and then study for the one that pays the most......that's our competitive way of life and I love it!!!!!!

 

[eytonxav]

Well, I'll say it.

I'm bugged about my CEO's excessive pay. Before FIREing Feb 1, as a senior manager, I helped my MegaCorp's CEO off-shore IT jobs to less reliable and less competent resources in low cost countries. I released many talented US citizens to help boost our stock and fatten his pocket. Not only were there devastated employees and their families but our customers also suffered. I did everything I could to minimize the pain to both, however.

That pig of a CEO got a raise of almost 20% but allotted almost nothing to the remaining employees who had to pick up the pieces.


I'm glad to be retired after 10 years of downsizing.

I can definitely relate to this comment as I've been in that same boat.

Make no mistake, being a CEO or President is a very tough 24x7 job and most people are unwilling to take on the risks/commitment that these folks have and if they deliver bonafide results they deserve great compensation. However, when I started in the work force, CEO pay was probably 25X vs an average worker, now it more like 350X. These jobs have always been tough, so I don't see anything that justifies this magnitude of increase over the years. Their compensation is a stacked deck with hand picked compensation committees and BODs that pat each other on the back and substantive measured performance for them is really a joke. Shareholders still are hamstrung to stop these abuses, although the subject of excessive compensation has received more lip service over the past several years.

Also, a bitter pill for me was seeing our CEO sell out our company in a so called merger of equals, that was really a buy out. Saw many great execs bailout as result with significant $ loss, while our former CEO made out like a bandit.

I for one do not see very many of today's CEOs in a positive light.

 

[dex]

Is it possible that the CEO pay question and the "Rich" question/problem discussed in another thread are really part of the same issue - they are being presented as a distraction and/or polarizing issue for political objectives?

In both issues the implied solution is to pay less/take more from the CEO/Rich, yet the benefit(s) of that is not presented and quantified.

So, pay the CEO less/year - how much $ less and what are the benefits of paying them less

Tax the rich more/year - How much $ will be received the government and where will it go?

 

[Danmar]

I was not a CEO but close. C_O. I felt like I had won the lottery as far as pay went. The job was very stressful though and as soon as I thought I had enough $$ I started the retirement process. Out at 56. Like many jobs-entertainment, sports, etc. many aspire but few succeed. The rewards are highly asymetrical. Luck usually plays a big role. I was lucky.

 

[Mulligan]

I believe part of the backlash comes from the continued articles that emphasize CEO's income has grown from under 30 times ave. worker pay in the 1960's, to around 300 times worker pay this past decade (different surveys have various specific numbers) If I am an "average" worker, I complain the money isn't flowing down hill like it should. If I'm a shareholder instead and the stock is performing well, I certainly wouldn't be as outraged! As far as comparing CEO pay to athletes, and movie stars, I don't believe the athletes get any more of a pass from the media and public on salary as the CEO's do. The celebrities get way more of a pass, because people don't often see the true cost from their pocket. Charlie Sheen gets his 20 million a year, but sitting on the couch watching "free" tv doesn't hit you in the wallet directly.

 

[Independent]

I was not a CEO but close. C_O. I felt like I had won the lottery as far as pay went. The job was very stressful though and as soon as I thought I had enough $$ I started the retirement process. Out at 56. Like many jobs-entertainment, sports, etc. many aspire but few succeed. The rewards are highly asymetrical. Luck usually plays a big role. I was lucky.

It's good to find an honest person.

 

[Rambler]

I believe part of the backlash comes from the continued articles that emphasize CEO's income has grown from under 30 times ave. worker pay in the 1960's, to around 300 times worker pay this past decade (different surveys have various specific numbers) If I am an "average" worker, I complain the money isn't flowing down hill like it should. If I'm a shareholder instead and the stock is performing well, I certainly wouldn't be as outraged! As far as comparing CEO pay to athletes, and movie stars, I don't believe the athletes get any more of a pass from the media and public on salary as the CEO's do. The celebrities get way more of a pass, because people don't often see the true cost from their pocket. Charlie Sheen gets his 20 million a year, but sitting on the couch watching "free" tv doesn't hit you in the wallet directly.

Just a thought, and I have not researched it at all, but it would seem to me that many of these megacorps of whose CEOs we speak are probably 10-20 times the size they were when CEO pay was 25-30x the average worker's salary (adjusted for inflation, of course). That would mean 10-20 times the responsibility. Perhaps that is a reason for 10x the old differential in SOME cases. My megacorp, for example, it 50x the size it was 26 years ago when I joined, and I know it's not due to inflation. I don't know exactly what the CEO was paid back then, but I'm pretty sure it was about a million, meaning the current CEO is only paid less than 4-5x what the CEO was paid back then, for leading/managing 50x the revenues/profits/employees/shareholder demands. The average worker's responsibility has gone up, but I wouldn't think it had gone up 50x or even 10x for that matter.

Of course, there are slime bag CEOs out there who certainly don't deserve what they are getting and who are certainly fleecing the employees and shareholders, but I think it would be dishonest to simply put them all in the same bucket, either way.

R