Bdroc said:It's too high, but it's not the government's job to tell shareholders how much they can pay their management. I would support giving shareholders greater say wrt CEO compensation.
It's too high, but it's not the government's job to tell shareholders how much they can pay their management. I would support giving shareholders greater say wrt CEO compensation.
Beryl said:Hmmmm. I never heard any US government branch attempting to do that unless they wanted government assistance (e.g. bail-out). I've heard 'talking heads' make that claim with no facts to support it.
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 don't think there's necessarily a backlash against what the best CEOs are making. I think it's a perception that there's little correlation between perceived performance and their compensation.For my money, outstanding leadership of an organization serving close to a million customers, with almost 30,000 staff and physicians, is worth way more than the CEO was getting. In the private sector he would have earned at least 3 times that amount.
At least in sports you pretty much can see when someone is All-Star caliber and can pay up accordingly.
In sports as in investing, "prior performance is not a guarantee of future results"....True... but once you start paying them you never know if they will stay that way... EG Carl Crawford, $147 million, Boston Red Sox... Horrible year last year and will miss at least half this season.
I don't think the public generally has a big problem with superstar pay for superstar performance. But I also think there is a feeling that they're all being paid like superstars even when they are mediocrities, that they take more value *out* of the business than they put in with their efforts -- and that it's too hard for the "unwashed masses" to get enough information or understand what *makes* a superstar (except in the extreme cases like Jobs and Buffett). This causes shareholders and rank-and-file level employees to get some heartburn.
Thank goodness for capitalism and market forces placing checks on government actions!
There are a few bad apples, but as a group CEO's got to where they are by working hard, taking risks/sacrifices, and planning ahead. Not all that different from those who FIRE (there are people out there who begrudge FIRE individuals, calling them lucky, privileged, the 1%... etc).
The vast majority got to where they are for a reason, and deserve to be rewarded for it.
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.In the year since this thread began nothing has really changed. There is still an enormous conflict of interest in how CEO compensation is determined and shareholders are not allowed to directly approve or reject.
I'm not sure about that. I suspect that a lot of them got to 2 rungs below CEO for a reason, but since then the Peter Principle has been operating, redoubled in spades.The vast majority got to where they are for a reason, and deserve to be rewarded for it.
I don't think there's necessarily a backlash against what the best CEOs are making. I think it's a perception that there's little correlation between perceived performance and their compensation.
At least in sports you pretty much can see when someone is All-Star caliber and can pay up accordingly. It's pretty obvious to just about everyone who even remotely understands how to evaluate performance of (say) a shortstop or a power forward. There's very little transparency to the public and unconnected smaller shareholders with respect to just how much the CEO is contributing to the success (or lack of success) of a business. Yes, we see the financials that are in required SEC filings, but there's no good way in the general case to see how much of that performance was really driven by the executives.
Some CEOs would be almost impossible to overpay based on the value they added to their businesses. Warren Buffett and Steve Jobs come to mind here; whatever you paid them, they added MUCH more shareholder value than they ever took out of the business. I don't think the public generally has a big problem with superstar pay for superstar performance. But I also think there is a feeling that they're all being paid like superstars even when they are mediocrities, that they take more value *out* of the business than they put in with their efforts -- and that it's too hard for the "unwashed masses" to get enough information or understand what *makes* a superstar (except in the extreme cases like Jobs and Buffett). This causes shareholders and rank-and-file level employees to get some heartburn.
In the year since this thread began nothing has really changed. There is still an enormous conflict of interest in how CEO compensation is determined and shareholders are not allowed to directly approve or reject.
I'd heard this criticism before WRT Vanguard, maybe they're listening https://personal.vanguard.com/us/content/Home/WhyVanguard/AboutVanguardProxyVotingRecordsContent.jsp. They voted against "Adopt/amend employee compensation plan" proposals 17% of the time if I'm reading this right. However, they voted against shareholder compensation proposals overwhelmingly too...I mostly agree but there are a few encouraging signs. The recent shareholder rejection of $15 million pay package for Citigroup CEO Vikram Pandit was a modest victory and one of the better things to come out of Dodd Frank.
Unfortunately for the most part institutional shareholders that are doing this are primarily CalPERS a few other pension funds, and often Fidelity.
Neither Schwab or Vanguard ever seem to active in these situation. One of my biggest complaints about index funds, and particular Vanguard is they have completely abandon their duty as owners. I have started pressing Schwab on what are you guys doing reign in excessive CEO pay.
I think it is worthwhile if you care about CEO pay to press Vanguard to take a more active role. I suspect that Vanguard gets several thousand calls a year from forum members. When they ask is there anything more you can do? Simply say matter or fact there is; next time there is shareholder vote on CEO that you think is excessive. Vote against it and put out a press release.
The point to make to Vanguard is that can save shareholders more money by reducing excessive executive compensation than can by reducing expenses another basis point or two.
By the end of the proxy season in June, the funds supported the vast majority (98%) of Say on Pay proposals, though the voting results don’t adequately reflect the level of engagement and dialogue in which we engaged with company officials. This is the same level of approval as the prior year, though the number of proposals has increased more than ten-fold under Dodd-Frank. Furthermore, this level of support is consistent with the market overall, with only 1.5% of companies failing to garner majority support in their Say on Pay votes.
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I know business isn't baseball, but many baseball analysts who embrace the new era of "sabermetrics" have a statistic called "WAR", or "wins above replacement." And what it means is basically this: How many wins in a year does a particular player give me above and beyond what a lower-paid "replacement level" player in the high minor leagues or weak major league backup would give? A really good player may have 5-6 WAR. That means a superstar player in the lineup gives you 5-6 more wins in a season than a strong minor league prospect or a marginal major league bench player would give you as a replacement. It's not a perfect stat but it has some merit, and it gives some idea of how much a player is worth above and beyond the level of mediocrity.The fundamental question is "if you replaced this person with another reasonably sharp, hard-working person making a high but reasonable salary, how much worse would the business have done?"