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04/15/2011

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Welcome and great post! I think you're right on about when executive compensation started getting out of control. And I don't think we'll see much change in the current setup. Maybe someone should start a company called 'Six Figure CEOs', offering qualified business professionals to run your company for 6 figures and no golden parachute.

Hey right on! Would be great for people that are already billionaires and want to "give back".

Thanks for the post Jacque.

It should be noted that the crazy increase in exec comp levels coincided with equity compensation's "Golden Decade" (1988-1999). Rules changes and a seemingly never ending bull market drove values to unsustainable levels. Unfortunately, even after the market corrected (in a couple of fits and starts) executive compensation did not correct accordingly.

The new paradigm was set and we have spent the past 10-12 years working in this new playbook. It will take a lot to get us back to the good old days of 30 years, where everything was already decried as out of whack.

Great post. Thanks

Right on target. No change seen. Not for nothing did Bud title his first "independent" book as "In Search of Excess," when he began doing penance for his years misspent "making top executives permanantly wealthy." That last, by the way, was the mandate I received when joining the corporate comp HQ of a Fortune 50 way back in the Day when Graef (Bud) Crystal gave his same "the speech" each year at the AMA conference.

For perspective, a young (then) PhD and I researched the AMA ECS original exec pay data for 1965, I think it was, which generated a disturbing article entitled "What Are Average and Above Average Salaries?". Even in the early 1970s, when AMA's ECS multiplied and divided logs instead of adding and subtracting them (that's statitistics talk) and thus overstated the actual market rates in their logarithmic formulae, they refused to correct their revealed errors: they responded that their customers preferred seeing their top executive pay LOOKing low against "the market," thus justifying ever-escalating executive enrichment schemes. SSDD. It's the Golden Rule.

Wait til you see my article on Compensation Committees and BODs.

Dan ---- you are more optimistic than I am.

Jim --- Bud taught my Exec Comp course in the certification program for ACA. I was in awe of him. Now . . . I would kiss his ring.

Great read! In 2006, the CEO to employee ratio was about 250 to 1. (http://www.epi.org/economic_snapshots/entry/webfeatures_snapshots_20060621/).

That doesn't suggest that the CEO is 250 times more intelligent, or 250 times more productive, or even talented than another person in the company. You're right: companies don't reward on performance, because if they did, exec comp would be different than we know today.

Companies have never been so profitable in history. The recession has hit the employees, but not companies. (I'm sure this can be debated. Ok, fine.) The the bottom line is that companies laid off thousands of employees, found a way to maintain efficiency, and not rehiring/replacing those salary lines because they figured out how to do without. As a result, CEOs are really getting paid the big bucks.

Makes me wonder if CEOs really have the shareholders' best interest in mind. Because the last time I checked, it's their own wallet that they are folding.

One important element - at least as I see it - that's completely missing in the broader conversation about executive compensation is ethics.

When executives are paid as they are, where is the ethical consideration for the fair treatment of employees? The environment? Shareholders? The public?

If a company improves its bottom line by laying-off thousands of people, exactly how did the CEO's "leadership" make the spreadsheets look better? Shouldn't the CEO and shareholders alike bear some basic, human resposibility for wrecking the lives of the people that got fired?

I think the answer should be a resounding, "yes." But then again, when the only measure of "performance" is bottom line thinking, we get exactly what we ask for.

Chris --- the reality is that CEO's are not rewarded based on performance. The whole system is rotten. CEO's are paid based on market comparisons to other CEO's. If every CEO's pay is compared to everyone else's and no one is being paid based on performance ---- then what do you have? Pay that is not based on true performance of the company. All you have is a bunch of people trying to stay up with the pack.

The fact is CEO's do not have control over the market price of their company's stock. Things have changed drastically in the last 10 years. With globalization stock is impacted by many things outside the CEO's control. Also, the market is manipulated by fewer and fewer people ---- not like the good ole days when everyone participated and had an impact.

Bottom line --- there needs to be another way to measure CEO performance. But I doubt that will happen. Too much at stake.

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