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(Forbes)   The highest paid CEOs are often the worst performers   (forbes.com) divider line 22
    More: Obvious, CEO, market cap, negative number, stock options, Larry Ellison  
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1943 clicks; posted to Business » on 16 Jun 2014 at 7:05 PM (49 weeks ago)   |  Favorite    |   share:  Share on Twitter share via Email Share on Facebook   more»



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2014-06-16 07:11:08 PM  
5 votes:

Because People in power are Stupid: My login name says it all.

The reason is that for some reason they have the Board of Directors under their control enough to get a high salary and therefore they are not answerable to anyone. Power controls not its own mistakes but rather the reporting of such mistakes.


Not quite.

The overpaid CEO of your company is governed by a board of directors, many of which are CEO's in their own right.   And guess what your CEO does for them?  He sits on their board of directors and ensure that they are overpaid as well.

It is nothing other than a capital theft club.

/ Best and brightest!
2014-06-16 08:14:02 PM  
4 votes:
I'm no MBA or law talking dude, but suppose you had a roofing company that had 100k in assets and were going bankrupt.  If you liquified all your assets and paid your brother-in-law 100k to mow your yard, and THEN declared bankruptcy, I'm pretty sure you would be going to jail.  Or at least the courts would come after the brother-in-law.

But that would be using the justice system we have for regular people, not the one we have for richer, better, people.  So I guess it's apples to oranges.
2014-06-17 12:18:31 AM  
3 votes:

Delay: Arkanaut: Wonder how much of that is due to CEOs getting a high "payday" (i.e. a severance package) when they get fired. Could be a factor although the study seems to have looked at multi-year performance as well.

It's not that they want a severance package. Although my background is relevant, I will attempt to explain what goes on with an example, rather than saying, "Hey I know this."

A CEO such as the current head of Citigroup, Michael Corbat, receives a salary pegged at $1.5 million per year. If his enormous company, C, does well he gets a bonus (about 3X his salary, OK, I guess) but his big payoff is his incentive stock options and that is performance based. Reflect on that first figure for a moment. Michael Corbat, current CEO of Citigroup, has a take-home salary about half of Sarah Palin's salary at Fox News.

The previous CEO of C, Vikram Padit, negotiated compensation over $50 million per year.

Let's compare the two CEOs? Under Vikram Padit, C stunk out industry. He was replaced. Under Michael Corbat, C has grown 30% per year.

Why is that? Vikram Padit enjoyed his ridiculous salary very much and he spent most of his effort at C in CYA, not for the interests of C. Michael Corbat spent most of his efforts building C.


You have done a great job. Proving that some CEO's absolutely suck and can still make $50 million bucks a year. The whole idea is nonsensical.

I believe a lot of CEOs are supremely talented brilliant people who have a big hand in creating lots of wealth and helping to provide jobs. I think supremely talented brilliant people should be well compensated.

But I also know that ceo compensation has grown far out of proportion to the pay the proles get. You can tell me all day long how awesome ceo's are - there should still be some connection to lower wage people that makes some kind of basic sense. Ain't no one ever been born that's worth $50,000,000 a year. That's 1,000 50k a year jobs. No one is worth that much more than another person even if the other person really, really sucks.
2014-06-17 11:11:14 AM  
2 votes:

BMFPitt: Quite a few entertainers do. And that's just the easiest to correlate to an individual. Probably some athletes, but hard to separate their earnings from what a team would make otherwise. You might argue that the people who are at the top of teams for major technologies can have impact on earnings in the billions (i.e. the guy who is in charge of Android.) And then there are guys like Warren Buffett, who would be a bargain at $50 million if he wanted to give himself a raise.


I'm firmly in the "You didn't build that." camp. No one makes that much without help.
2014-06-16 10:57:05 PM  
2 votes:
Regard a nation not by how it treats its most affluent, but by how it treats its least affluent.
2014-06-16 08:43:09 PM  
2 votes:

Pythagorean Thermos: By that metric, I would be a great CEO.


By that metric, the best CEO ever would be the Mexican with the leaf blower.

They're getting paid a lot because they aren't there to make the company more solvent, they're there to make a metric ass-ton of money in the short term for the board/shareholders and dump everything when the ship goes down. That, or they're "too big to fail" and they know that no matter what they do, they're going to get free money.
2014-06-16 08:20:17 PM  
2 votes:

gnosis301: ZZ9 Plural Z Alpha: Boards of Directors:

How does one solve that kind of problem? From the comic, I mean.


It isn't a problem.  There is nothing to solve there.
2014-06-16 05:41:41 PM  
2 votes:
My login name says it all.

The reason is that for some reason they have the Board of Directors under their control enough to get a high salary and therefore they are not answerable to anyone. Power controls not its own mistakes but rather the reporting of such mistakes.
2014-06-17 03:02:25 AM  
1 votes:
Do y'all remember back in history class. When we used to laugh about the excesses of royalty in Mayan civilizations, or back in the Baroque period on Europe...

...Yeah, these folks aren't much better.
2014-06-17 02:09:49 AM  
1 votes:
Larry Ellison is their example? Really?

I don't think they should use CEOs who actually founded the company in the study. Those people won't give up the reins easily at all and boards of directors will be highly reluctant to fire them. It stands to reason that founders syndrome is alive and well and skewing the results.
2014-06-17 01:45:26 AM  
1 votes:

Rent Party: The overpaid CEO of your company is governed by a board of directors, many of which are CEO's in their own right. And guess what your CEO does for them? He sits on their board of directors and ensure that they are overpaid as well.


When the common rabble do that, they're Union Thugs and it's Class Warfare and zOMG SOOOOOCIALISM!
2014-06-16 10:18:54 PM  
1 votes:

Debeo Summa Credo: Rent Party: Because People in power are Stupid: My login name says it all.

The reason is that for some reason they have the Board of Directors under their control enough to get a high salary and therefore they are not answerable to anyone. Power controls not its own mistakes but rather the reporting of such mistakes.

Not quite.

The overpaid CEO of your company is governed by a board of directors, many of which are CEO's in their own right.   And guess what your CEO does for them?  He sits on their board of directors and ensure that they are overpaid as well.

It is nothing other than a capital theft club.

/ Best and brightest!

This is what farklibs actually believe.

Less than 20% of Fortune 500 board members are CEOs of other Fortune 500 companies.


So 1 in 5 for Fortune 500 firms.  Care to guess how many sit on boards of 501-thanks for all the fish?  I'll give you a hint.  It's 1 in 2, and that's down from a decade ago.
2014-06-16 09:59:23 PM  
1 votes:

AlgaeRancher: its like the four people who applied for that university president job together.

A company could hire a team of people to handle decision making... they could do more and cost far less than a CEO.


I am firmly of the position that we should be looking into replacing CEOs with computers.  There really isn't anyone more wasteful on the payroll than a corporate CEO, and if we replace them with something that can work 24 hours without sleep, personal time, or boredom, then productivity should improve substantially.

Why would a board pay for a human CEO when they provide such bad ROI?
2014-06-16 09:35:49 PM  
1 votes:
My personal take: fantastically wealthy and accomplished CEOs have nothing to prove. They're going to phone it in.

The upstarts are the ones that are driven like mad to do a good job.

Of course, this all presumes that CEOs actually do anything.
2014-06-16 08:28:10 PM  
1 votes:

Arkanaut: Wonder how much of that is due to CEOs getting a high "payday" (i.e. a severance package) when they get fired. Could be a factor although the study seems to have looked at multi-year performance as well.


It's not that they want a severance package. Although my background is relevant, I will attempt to explain what goes on with an example, rather than saying, "Hey I know this."

A CEO such as the current head of Citigroup, Michael Corbat, receives a salary pegged at $1.5 million per year. If his enormous company, C, does well he gets a bonus (about 3X his salary, OK, I guess) but his big payoff is his incentive stock options and that is performance based. Reflect on that first figure for a moment. Michael Corbat, current CEO of Citigroup, has a take-home salary about half of Sarah Palin's salary at Fox News.

The previous CEO of C, Vikram Padit, negotiated compensation over $50 million per year.

Let's compare the two CEOs? Under Vikram Padit, C stunk out industry. He was replaced. Under Michael Corbat, C has grown 30% per year.

Why is that? Vikram Padit enjoyed his ridiculous salary very much and he spent most of his effort at C in CYA, not for the interests of C. Michael Corbat spent most of his efforts building C.
2014-06-16 08:17:04 PM  
1 votes:

BigLuca: I'm no MBA or law talking dude, but suppose you had a roofing company that had 100k in assets and were going bankrupt.  If you liquified all your assets and paid your brother-in-law 100k to mow your yard, and THEN declared bankruptcy, I'm pretty sure you would be going to jail.  Or at least the courts would come after the brother-in-law.

But that would be using the justice system we have for regular people, not the one we have for richer, better, people.  So I guess it's apples to oranges.


this. well put, and lulzy
2014-06-16 08:05:38 PM  
1 votes:

itcamefromschenectady: Gee, I wonder if the fact that CEOs are often paid a large amount to try to turn around failing companies has anything to do with this correlation?

You can believe what you want, but when you link high-paid CEOs with poor performing companies, you should at least pretend to have considered and ruled out the causation going in the opposite direction.


Yeah. If you're desperate and sinking, you're more likely to go for one of these hired guns who makes big promises and cleans house when he shows up.
Then the company goes to shiat anyway.
2014-06-16 08:00:23 PM  
1 votes:
Supposedly The Economist wrote an article years ago comparing highly paid "star" CEOs to highly paid star athletes, in which they concluded that you could show that the athletes usually increased revenue to the team's owners to a degree that justified their salaries; not so the CEOs.
2014-06-16 07:46:27 PM  
1 votes:
its like the four people who applied for that university president job together.

A company could hire a team of people to handle decision making... they could do more and cost far less than a CEO.
2014-06-16 07:42:06 PM  
1 votes:
Wonder how much of that is due to CEOs getting a high "payday" (i.e. a severance package) when they get fired. Could be a factor although the study seems to have looked at multi-year performance as well.
2014-06-16 07:21:27 PM  
1 votes:
www.accountingweb.com
2014-06-16 07:11:06 PM  
1 votes:
By that metric, I would be a great CEO.
 
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