Obama doesn't want you to succeed

[PrinceofWands]

While I don't necessarily agree with artificial caps on salary, I absolutely agree with his assessment of piece of crap executives making bank while they run their companies into the ground. What I'd like to see is 100% liability for executives and BoD's tied to the company. If customers or employees suffer due to mismanagement then the higher ups should be the first to starve.

 

[superstition]

Typical socialist propaganda.

Typical ad hominem response.

 

[punchkin]

Originally posted by: Fern
I think the more relevant yardstick is comparing CEO compensation as a percentage of gross revenue. Has it declined or increased?

Fern

There are a few problems with this, including the possible assumption that the CEO is entitled to a share of an increase because he is assumed to have caused it.

 

[punchkin]

Originally posted by: PrinceofWands
While I don't necessarily agree with artificial caps on salary, I absolutely agree with his assessment of piece of crap executives making bank while they run their companies into the ground. What I'd like to see is 100% liability for executives and BoD's tied to the company. If customers or employees suffer due to mismanagement then the higher ups should be the first to starve.

I agree with the starvation concept, but what do you mean by "100% liability"? It would be going too far, at least, to make executives personally liable for underperformance of the company which they did not cause.

 

[superstition]

Poor and middle-class families are entering the recession in a precarious situation due in part to declining or stagnant income growth, a study released Wednesday has found.

Incomes, on average, have declined by 2.5% among the bottom fifth of families since the late 1990s, while inching up by just 1.3% for those in the middle fifth of households, according to an analysis by the Center on Budget and Policy Priorities and the Economic Policy Institute. The wealthiest slice of Americans, however, saw their incomes rise by 9%.

The average income of the bottom fifth of families was $18,116; the middle fifth, $50,434; and the wealthiest fifth, $132,131.

Unlike what happened during the economic boom of the 1990s, lower- and middle-class families did not share in the prosperity of recent years, the report found. In fact, the United States has had its longest jobless recovery and slowest rate of payroll growth during this decade.

"We're worried about the impact of the downturn on the families whose incomes haven't recovered from the last recession," said Jared Bernstein, Economic Policy Institute senior economist and co-author of the report.

Wages have not kept up with inflation, families have loaded up on debt and homeowners have seen the value of their largest asset decline, he said. The situation will only get worse during the economic downturn.

"Families are uniquely economically exposed to the costs of recession," he continued. "As we head into a recession, their incomes will take a further hit."

The income gap between the rich and the rest of the population is widening. In 22 states, the top fifth of families made more than seven times what the poorest fifth took home, according to the report. In the late 1980s, only one state - Louisiana - had such a spread. Meanwhile, in more than two-thirds of the country, the wealthiest saw their income grow more than twice as fast as the middle-class over the past two decades.

http://money.cnn.com/2008/04/0...egap/index.htm?cnn=yes

 

[Rainsford]

Originally posted by: Fern
2 Things:

1. Compensation IS tied to performance. Link Look at Chart #3

The smaller companies pay an average of 57% of the CEO's compensation in salary, the rest is stock etc. In largest companies, only 12% of the CEO's comp is salary, the majority being stock & options. So, if the company doesn't perform (resulting in higher stock value/price) the CEO loses out.

Well if that's true, what's the big deal about what Obama said? The idea that shareholders should be able to signal their displeasure with poorly performing CEOs isn't some socialist idea if CEO pay is ALREADY linked to performance.

2. Strikes me as all this "CEO make XXX times what they used to" is probrably BS. Corporations continue to get larger, with more lines of business, more revenue, more employees and more operations in far flung places etc. I see no reason whatsoever that a CEO's comp should be linked (as a multiple of) an average worker's salary.

I think the more relevant yardstick is comparing CEO compensation as a percentage of gross revenue. Has it declined or increased?

Fern

But why doesn't that apply to EVERYONE in a company, why is it only the higher level executives who benefit from "more lines of business, more revenue, etc..."? A CEO is not a one man business machine. His success, and the success of his company, relies on the abilities and accomplishments of his employees as well as his own abilities. Yet real wages for the middle class employees have remained stagnant for years, and possibly even gone down, while the folks who run and own the company are seeing their real earnings go up like crazy.

I think most people realize that executives of a company work pretty hard to do what they do, and they have no problem with the executives being well compensated for their work. But when employee wages remain the same while executive wages go up like crazy, it reinforces the idea that we're not all in this together...that employees are just peons working to make somebody ELSE rich.

 

[Fern]

Originally posted by: punchkin

Originally posted by: Fern
I think the more relevant yardstick is comparing CEO compensation as a percentage of gross revenue. Has it declined or increased?

Fern

There are a few problems with this, including the possible assumption that the CEO is entitled to a share of an increase because he is assumed to have caused it.

You have misunderstood me. I'm not implying that they be somehow rewarded for the increase. It's about how much they are managing, and their compensation should be viewed in relation to that.

E.g., accounting costs for corporations are usually in the range of 2-3%. It's meaningless to say accounting costs have risen by a multiple of X. It needs to be viewed as a percentage of revenue.

What percentage are CEO "costs"? Have they gone up or down?

If down it's hard to argue that they are overpaid. They are paid to manage, the more you are responsible for, the more you are paid.

Also, would like to know the ratio of average employee to CEO. E.g., 10,000 regular employees for each CEO. has it been increasing? If so, the CEO compensation multiple should as well.

Edit: In a nutshell, I'm suggesting this is faulty:

"The average pay for chief executives rose to 369 times that of the average worker in 2005," Josh Fineman of Bloomberg News wrote on January 4. That was "up from 131 times in 1993 and 36 times in 1976, according to a study by Kevin Murphy, a finance professor at the University of Southern California."

Fern

 

[Phokus]

Very few CEOs justify the enormous pay packages that they are getting. How many Executives really make that much of a difference in their companies? How many are truly visionary executives? How many started their own companies? I can only think of Steve Jobs, the Google guys, and even Bill Gates deserving a blank check they can write (all tech guys of course). If you're the CEO of Exxon Mobile, how much new ground are you breaking? Your value is more likely tied to the contacts you have, especially in Washington D.C.

 

[superstition]

Very few CEOs justify the enormous pay packages that they are getting.

It's a question of productivity. Is it humanly possible to deliver 470 times the work of another full-time employee? I say not. One site with humorous facts about Gates' wealth calculated how fast he would have to travel to pick up his net worth if it were laid out in 10 dollar bills. It was something like he would have had to fly through the air. Since people can't fly, it seems logical that people can't be productive enough to deserve that much loot, particularly when there are others who are doing innovative work instead of just figuring out how to make bad products (Office 6 for Mac, ME, Vista), bad copies of superior products (Windows 3.x vs. Mac), steal/absorb/destroy start-ups (Netscape), and leverage monopoly power for artificial prices and stagnation.

Gates has done more harm to the computer industry than probably anyone else, although Jobs also deserves quite a lot of flack. His (and Sculley's) mis-management in the 80s resulted in much of the Lisa tech (multitasking and protected memory, for starters) being flushed in favor of an underpowered toy that was marketed under false pretenses (a 512k model with speech synthesis pretending to be the initial 128k model). The sheer ineptness of the early Mac (not even the ability to use a hard disk, non-expandable 128k memory) and the ineptness of Jobs/Sculley allowed Microsoft to produce their crapware and foist it onto the world, as if Windows 95's poor multitasking and semi-protected memory was a revelation (in 1995!). The Lisa platform was imperfect, but it was a heck of a lot better than what came out of Apple or Microsoft for many years, and could have been the basis for an industry standard much more robust than the stupid brain-dead IBM PC, rightly called "old tech" by critics when it was released. Mac users suffered with bombing from unprotected memory and "PC" users got to suffer with DOS-based Windows. Netscape was killed off, resulting in browser stagnation and the death of that business model. At least Jobs had vision enough to start NeXT. What did Gates ever do that was innovative, outside of monopoly management?

The tech industry would be a lot stronger if cooperation, instead of competition, were the mode of thinking. That's true of the world as well. There has been a lot of waste, stagnation, and suffering that has resulted from predatory business practices. Greed is not the root of goodness as capitalists like to pretend it is.

 

[pinktank]

a) its not communist, it's socialist (the thing you are trying to mean)
b) it isn't either
c) it would be very good for your country
d) I don't think he'll tackle this problem seriously as the opposing powers are quite mighty

 

[Brigandier]

Originally posted by: superstition

Typical socialist propaganda.

Typical ad hominem response.

Sarcasm, my friend.

 

[ElFenix]

Originally posted by: FuzzyBee

And they are, legally, by the board of directors, who only got their cushy director jobs because they're the friends of the CEO.

Is there cronyism? Absolutely. But legislation of an "outrage" vote won't fix that.

fixed

 

[ElFenix]

Originally posted by: Rainsford

Originally posted by: JS80

Originally posted by: Rainsford
Well it seems to me that in a capitalist system you are rewarded based on your added value to the market as a whole. CEO pay has risen orders of magnitude faster than pay for the average worker, and this holds true even if they do a completely terrible job and end up costing their company billions of dollars. Nothing about that situation sounds even remotely "capitalist" to me.

The fact is that CEO pay packages that penalizes for underperformance gives a huge deterrent to risk taking and corporate growth is slower.

This board has a bunch of fucking backseat CEOs who have no idea what the hell they are talking about. A bunch of envious little shits who don't have the balls to go make something out of themselves and try to keep others miserable with them.

That's counter-intuitive. I'm all in favor of giving people incentive to "go make something out of themselves", which is the entire point of capitalism. So if your pay package isn't based on performance, what incentive do you have to do a good job?

Despite what you might think, being a CEO doesn't turn you into a benevolent member of some better class, they're capitalists just like everyone else. Pay that's not tied to performance wouldn't provide much incentive in any other position, so it makes no sense that it would work for CEOs.

because CEOs are risk averse value maximizers (just like everyone else) and so if doing an OK job that doesn't take many risks, thereby not growing the company (or poorly growing the company by conglomerating, which typically reduces risk but also leads to stagnation), still gets them their stock options and their 6 or 7 figure salary, they're going to do that.

this is opposite of shareholders, who reduce risk by diversifying. so shareholders want CEOs to play business hardball.



and, of course, it's very necessary to define what set of CEOs you're talking about. CEOs of the top 100 companies will make, on average, more than CEOs of the top 500, on average, and from there on down.




apparently the UK has non-binding shareholder approval of CEO pay, and companies often abide by the outcome. of course, if your 5 largest shareholders are also your best buddies and you all sit on each others boards, that isn't particularly surprising.

 

[TheAdvocate]

Originally posted by: sirjonk
It was my understanding CEO and other executive compensation packages are devised by the Board of Directors and are not challengeable in court by shareholders short of the 'waste' standard, which is extremely difficult to meet.

They are validated by extremely biased "compensation committees" - consultants who know where their bread is buttered, and will play ball accordingly. Their sole purpose is to add a layer of very misleading legitimacy to an extremely unobjective, old-boy process.

It's becoming both a problem and an eyesore for our economy. Remember when the last Home Depot CEO got canned? He took home a payday for running the company into the ground by understaffing, which backfired horribly. Greedy bastard still got his $40mil though.

 

[piasabird]

Obama truly does not like the midwest or anyone from a small town or goes to a real Christian Church where people actually read the Bible. Heaven forbid we have hope for the future. I guess he belongs to the Metro Sexual Party.

 

[nageov3t]

Originally posted by: piasabird
Obama truly does not like the midwest or anyone from a small town or goes to a real Christian Church where people actually read the Bible. Heaven forbid we have hope for the future. I guess he belongs to the Metro Sexual Party.

people are afraid of hope, I think they'll grasp onto any straw that comes their way that they can use in their defense of the status quo, but Change is coming.

 

[ProfJohn]

Originally posted by: Phokus
Very few CEOs justify the enormous pay packages that they are getting. How many Executives really make that much of a difference in their companies? How many are truly visionary executives? How many started their own companies? I can only think of Steve Jobs, the Google guys, and even Bill Gates deserving a blank check they can write (all tech guys of course). If you're the CEO of Exxon Mobile, how much new ground are you breaking? Your value is more likely tied to the contacts you have, especially in Washington D.C.

Have you ever ran any company of any size?

If you had you would realize how much of an impact one person can have on a business, especially when that person is at the top managing the direction of the company.

 

[ProfJohn]

Can someone please tell me exactly how many "bad" CEOs we have out there.

Reading through this thread you would think that half the CEOs out there are running their companies into the ground.

According to Fortune magazine there are over 1000 public companies in this country with over $1.5 billion in revenue.

 

[RightIsWrong]

Originally posted by: ProfJohn
Can someone please tell me exactly how many "bad" CEOs we have out there.

Reading through this thread you would think that half the CEOs out there are running their companies into the ground.

According to Fortune magazine there are over 1000 public companies in this country with over $1.5 billion in revenue.

How many companies have posted losses or reduced their expected earnings over the last quarter?

You seem to think that anyone in a position of power is directly responsible for the success of an organization yet seemingly admonish them of any blame when things aren't going as well and blame it on market forces or some other vague outside force.

Prime example: Bush.

You have backed the vast majority of his economic packages/legislation. You refuse to acknowledge that the trickle down theory has been proven time and time again to not be an effective way of producing consistent, sustainable growth. You refuse to acknowledge that the Bush tax cuts were not a good idea in moderately good times and an absolutely horrid idea during a time when the country is spending $12B/mo in Iraq.

You make the claim over and over that Clinton didn't really deserve any of the credit during the 90's and Bush doesn't deserve any blame during the 00's. If that is the case, then why does a CEO deserve the credit when the company is doing well and what justifies his salary raising exponentially while the people that are truly doing the work are losing salary when adjusted for inflation?

 

[ProfJohn]

There is a slight difference between a guy running a business (CEO) and a guy sitting behind a desk in Washington DC.

 

[RightIsWrong]

Originally posted by: ProfJohn
There is a slight difference between a guy running a business (CEO) and a guy sitting behind a desk in Washington DC.

Then what about the first question?

Does a company that posts negative earnings or misses their earnings mark deserve to blame the CEO? Does that make him a "bad" CEO?

If not, why does the same person get to take all of the credit and reap all of the rewards when times are good?

 

[Vic]

Originally posted by: piasabird
Obama truly does not like the midwest or anyone from a small town or goes to a real Christian Church where people actually read the Bible. Heaven forbid we have hope for the future. I guess he belongs to the Metro Sexual Party.

Heh... this comment from a Mormon...

 

[chucky2]

Originally posted by: RightIsWrong

Originally posted by: ProfJohn
There is a slight difference between a guy running a business (CEO) and a guy sitting behind a desk in Washington DC.

Then what about the first question?

Does a company that posts negative earnings or misses their earnings mark deserve to blame the CEO? Does that make him a "bad" CEO?

If not, why does the same person get to take all of the credit and reap all of the rewards when times are good?

I would say No, not always. You could have a good CEO that gets hit by market forces, unexpected competition/factors, etc. Just because a company is doing bad doesn't always meant the CEO is at fault.

Now, a company doing bad for 8 quarters on end...that's not good. Or a company that's in decent shape, normal market, nothing going on...gets a new CEO and he F's it up...that's not good either.

Almost in no cases though do these CEO's deserve the packages they get. No one is worth $35M a year. No one.

I don't disagree with Obama that CEO compensation is out of control (but then again, this isn't an Obama revelation, nearly everyone has this opinion), but the legislation he wants passed amount to accomplishing absolutely nothing...which means it's just more BS on the books and more time wasted by our Congress debating and voting on it, when they have hugely massive more important things to be spending their time on.

This is clearly something Obama is throwing out there to gain votes, nothing more. -1 for Obama.

Chuck

 

[Fern]

Originally posted by: chucky2

Originally posted by: RightIsWrong

Originally posted by: ProfJohn
There is a slight difference between a guy running a business (CEO) and a guy sitting behind a desk in Washington DC.

Then what about the first question?

Does a company that posts negative earnings or misses their earnings mark deserve to blame the CEO? Does that make him a "bad" CEO?

If not, why does the same person get to take all of the credit and reap all of the rewards when times are good?

I would say No, not always. You could have a good CEO that gets hit by market forces, unexpected competition/factors, etc. Just because a company is doing bad doesn't always meant the CEO is at fault.

-snip-
Chuck

Agree with Chuck.

No matter whether the company in profit or less, we have many factors to judge a CEO's performance. E.g., compare industry ratio's. If company A's stock is selling at a multiple of 7 (stock price is 7 times the EPS) and company B is selling at a multiple of 14 it might be that company A is underperforming no matter that it had good profits.

Likewise, hindsight is of course useful. E.g., In the mid '80's I worked with a lot of high-level execs at IBM. These guys never saw the PC boom coming, they vastly underestimated demand. Partially as a result of that, the Asian companies moved in to take market share IBM could have had. These execs got fired. Earnings multiples, gross revenue etc weren't helpful, but identifying startegic blunders with hindsight sure was.

To simply judge: profit = good CEO, loss = bad CEO is far too simplistic.

Fern

 

[Vic]

Originally posted by: chucky2

Originally posted by: RightIsWrong

Originally posted by: ProfJohn
There is a slight difference between a guy running a business (CEO) and a guy sitting behind a desk in Washington DC.

Then what about the first question?

Does a company that posts negative earnings or misses their earnings mark deserve to blame the CEO? Does that make him a "bad" CEO?

If not, why does the same person get to take all of the credit and reap all of the rewards when times are good?

I would say No, not always. You could have a good CEO that gets hit by market forces, unexpected competition/factors, etc. Just because a company is doing bad doesn't always meant the CEO is at fault.

Now, a company doing bad for 8 quarters on end...that's not good. Or a company that's in decent shape, normal market, nothing going on...gets a new CEO and he F's it up...that's not good either.

Almost in no cases though do these CEO's deserve the packages they get. No one is worth $35M a year. No one.

I don't disagree with Obama that CEO compensation is out of control (but then again, this isn't an Obama revelation, nearly everyone has this opinion), but the legislation he wants passed amount to accomplishing absolutely nothing...which means it's just more BS on the books and more time wasted by our Congress debating and voting on it, when they have hugely massive more important things to be spending their time on.

This is clearly something Obama is throwing out there to gain votes, nothing more. -1 for Obama.

Chuck

RTFA. Obama threw this out there solely in response to all-talk-no-walk comments from McCain. If McCain hadn't been throwing out rhetoric and phony outrage about CEO compensation with no record of his own to back it up, then this wouldn't have been an issue in the first place.

-1 for chucky2 for not reading the article