Do companies need to pay CEOs etc. so much?

Winterlong · 21-12-2016 05:19PM

Bring in world wide communism. That'll solve it OP.

ScumLord · 21-12-2016 05:22PM

CEOs come with a certain amount of celebrity and contacts that would make them worthwhile. Getting a well known individual to manage your company may put certain lenders or shareholders at ease for example. The new CEO may have contacts that could reduce costs over all or allow them to enter new markets. They often have objectives set that might suit their expertise as well and once those goals have been met they get a different type of CEO. You can be guaranteed one thing though. It's unlikely a private company would pay out big bucks if they could avoid it. So by that criteria I'd say they're probably worth the money.

steddyeddy · 21-12-2016 05:29PM

I have no idea. How does CEO pay correlate with their performance?

KyussBeeshop · 21-12-2016 05:33PM

steddyeddy wrote: »

I have no idea. How does CEO pay correlate with their performance?

The OP has some links in the OP, which show that no - CEO pay generally doesn't mean better performance, the link between pay and performance is low - so that link/myth that keeps being brought back from the dead here, seems to be wrong.

A Dub in Glasgo · 21-12-2016 05:34PM

steddyeddy wrote: »

How does CEO pay correlate with their performance?

It generally does not

ScumLord · 21-12-2016 05:40PM

A Dub in Glasgo wrote: »

It generally does not

Depends on what the expectations are. Maybe they don't expect the CEO to improve sales but improve the efficiency of the company, upgrading production lines, bringing new technology online, Breaking into a particular market.

KyussBeeshop · 21-12-2016 05:46PM

No you're just repeating the same myth in different form.

ScumLord · 21-12-2016 05:52PM

KyussBeeshop wrote: »

No you're just repeating the same myth in different form.

How is it a myth? If a company wants to start doing something new it won't have the necessary skill base in it's employ, it probably won't even know how to hire the right people. It makes sense to bring in someone who knows what they're doing through experience. That happens all the time in businesses all over the world.

KyussBeeshop · 21-12-2016 06:11PM

You're talking about a business hiring a competent CEO. You are associating this with the type of high CEO pay which the thread is talking about. That is the myth - the association between high pay and performance - that you are repeating, in various different forms, despite other posters having debunked it.

Your current post is making the exact same assumptions - that a company "won't have the necessary skill base in it's employ, it probably won't even know how to hire the right people", that a company won't have "someone who knows what they're doing through experience" - unless they shell out for this type of high CEO pay.

So yes, you're just repeating the same myths others have presented evidence against in the thread - you're not even being subtle in how you reword your presentation of the same myth.

ScumLord · 21-12-2016 06:18PM

KyussBeeshop wrote: »

You're talking about a business hiring a competent CEO. You are associating this with the type of high CEO pay which the thread is talking about. That is the myth - the association between high pay and performance

CEOs are hired for specific reasons, they have contracts with specific stipulations, they do have to perform, their wage is often based on their previous experience with other companies.

What's mythical about all that?

So yes, you're just repeating the same myths others have presented evidence against in the thread - you're not even being subtle in how you reword your presentation of the same myth.

I still don't see what you see as mythical.

What are you saying is happening? That companies pick CEOs out of a hat? That they just hire people they knew in school? That CEOs don't actually have to do anything after they get hired?

KyussBeeshop · 21-12-2016 06:23PM

I don't think other posters will believe you failed to see, that I'm describing as mythical, the link between high CEO pay and performance - given that I don't believe you, and I feel you're on a wind-up, I'm not going to bother responding to you further.

ScumLord · 21-12-2016 06:27PM

KyussBeeshop wrote: »

I don't think other posters will believe you failed to see, that I'm describing as mythical, the link between high CEO pay and performance - given that I don't believe you, and I feel you're on a wind-up, I'm not going to bother responding to you further.

No your bowing out because your not making any sense. I'm saying companies hire CEOs for rational reasons to improve their business. I don't know what you're saying. You won't explain what you mean by mythical.

Overheal · 21-12-2016 06:29PM

They'll pay what they want to, a company does what it needs to make a profit, keep shareholders happy, and be productive.

You know, if workers en masse refused to work for companies based on CEO to worker pay ratios, companies might change their behavior but theres no guarantee of that. They can do as they like, and employees can come and go as they please. Fact is, employees often undervalue themselves, and so do employers.

Sleepy · 21-12-2016 06:31PM

The biggest problem I see with private sector companies overpaying their CEO's is senior management in the public sector expecting to be similarly overpaid.

Water John · 21-12-2016 08:18PM

I believe that the two who won the Nobel prize for Economics in 2015, work was on the premise that a high risk job should have a set salary whilst a low risk job should have performance based criteria. All contrary to perceived thinking.

Austria! · 21-12-2016 10:04PM

Keenan Melted Snap wrote: »

1. Don't invest in companies that pay their CEO's what you deem unacceptable.
2. What's the alternative (to high inequality)?

1. That's a policy I have already. But this discussion is about determining what is acceptable
3. Generally the alternative to high inequality is low inequality achieved through progressive taxation. In this instance lower remuneration for CEOs has a similar effect.

BrokenArrows wrote: »

You would just leave and go somewhere else.

And thats what CEO's will do, unless you get a world wide decision by all companies to standardize ceo payments.

andekwarhola wrote: »

Simple enough premise. When there's only X amount of qualified people, the rate is proportional to the extent that companies bid against each other. It's not a question of set value for set worth.

You're saying that as if the amount of people you could appoint CEO doesn't massively outnumber the positions available, which would be really decisive in this discussion if you could show it to be true.

ScumLord wrote: »

CEOs come with a certain amount of celebrity and contacts that would make them worthwhile. Getting a well known individual to manage your company may put certain lenders or shareholders at ease for example.

Lenders and shareholder confidence could be based on how well paid or in demand the CEO is. I'll conceded that, and given that people here think remuneration is based on merit, shareholders and lenders might have the same idea. I'll concede that. Of course shareholders and lenders could think more like me and be unsettled by high CEO wages.

The new CEO may have contacts that could reduce costs over all or allow them to enter new markets.

I'm struggling to see how that would work, outside of maybe political lobbying. If you had a way to reduce costs, wouldn't it depend on you finding a new supplier or having some ideas about streamlining the business. Where would contacts come into that?

It's unlikely a private company would pay out big bucks if they could avoid it. So by that criteria I'd say they're probably worth the money.

One thing raised in the Irish Times article in the OP, is that payment is set by a board of directors, who all benefit from the culture of high managerial payouts.
This article in the economist makes the same case
http://www.economist.com/node/2119378

Also, you have to remember that some of these companies are so big that the huge payouts to CEOs can look insignificant, so they're not s concerned with getting value in this area.

Finally, while I admire the ability of private companies to jeep costs down, this is by no means a perfect process, and it's inadequate to find value in an expense by saying a private company is willing to pay.

Winterlong wrote: »

Bring in world wide communism. That'll solve it OP.

Ssssshhhhhh! Patience, comrade. First I'm softening the ground by having a discussion of boardroom pay.

CINCLANTFLT · 21-12-2016 10:08PM

sbsquarepants wrote: »

State owned companies - that's a different matter.

That is where it gets interesting...

Water John · 21-12-2016 10:29PM

Look at the Irish Farmers Association (IFA). Big kick up about CEO and President salaries. New ones are accepting a near halving of the previous.

Certainly don't think CEO of any charity or association should be above €100K.
If the money is that important to you, we don't want you, should be the motto.

Earthhorse · 21-12-2016 11:38PM

Deleted User wrote: »

Who cares? Companies can do what they like if the shareholders are fine with it.

sbsquarepants wrote: »

Who cares. I couldn't give a toss if a private company pays it's CEO minimum wage or a gazillion dollars an hour. It's their money they can do whatever they hell they want with it. If I could talk my company into paying me 100m a year, I'd gladly accept it - problem is the fúckers just won't give it to me (They actually said I was being ridiculous at my last pay review - fúcking nerve of them:mad:)
State owned companies - that's a different matter.

Who cares? Who cares if there's growing inequality in the economy? Who cares if there a golden circle in business propping each other up? Who cares if we don't actually live in a meritocracy whilst insisting we do? Jesus Christ, have you seriously so little interest in the world around you?

sbsquarepants wrote: »

There's a fairly simple way of measuring it - profits or losses.
Are things getting better or are they getting worse - pay the driver accordingly!

That is a very simple way to measure it alright which is why it mostly tells you sweet f*ck all. CEOs can engage in short term practices that inflate profits in the short run, such as slashing costs, but leave the business bankrupt in the long run. Similarly a company may be restructured in the short run and incur losses in the short run even though that ensure its long term health.

=Sleepy;102036531]The biggest problem I see with private sector companies overpaying their CEO's is senior management in the public sector expecting to be similarly overpaid.

Even when the problem is in the private sector the problem is really in the public sector; Jesus wept.

TimeToShine · 21-12-2016 11:59PM

The CEO is responsible for the companies vision and awareness as well as propelling it forward in the market.

Look what happened to Sears/Radioshack. CEO's who couldn't adapt to the environment and ended up running them into the ground. Now more than ever CEO's are earning their pay as they have to work in an incredibly fast-paced and dynamic environment. The tech world has exploded and one wrong move will bury you.

CEO's deserve what they get. Just because people at the bottom of the ant hill can't see what they do it doesn't mean they don't earn it. The real waste, especially in public companies, is the amount of money spent on useless middle and senior management roles.

Oafley Jones · 22-12-2016 12:00AM

sbsquarepants wrote: »

There's a fairly simple way of measuring it - profits or losses.
Are things getting better or are they getting worse - pay the driver accordingly!

Not so simple when you consider a CEO may use a short term growth strategy (to the detriment of the company) in order to secure their own financial incentives in terms of shares bonuses etc.

Oafley Jones · 22-12-2016 12:02AM

TimeToShine wrote: »

The CEO is responsible for the companies vision and awareness as well as propelling it forward in the market.

Look what happened to Sears/Radioshack. CEO's who couldn't adapt to the environment and ended up running them into the ground. Now more than ever CEO's are earning their pay as they have to work in an incredibly fast-paced and dynamic environment. The tech world has exploded and one wrong move will bury you.

CEO's deserve what they get. Just because people at the bottom of the ant hill can't see what they do it doesn't mean they don't earn it. The real waste, especially in public companies, is the amount of money spent on useless middle and senior management roles.

I'm guessing that Marissa Mayer (when she leaves) will be just fine financially.

edit: Just was reading a story about Nokia. Remember them. They hired Stephen Elop from MS to guide them in competing with the iPhone. Didn't go so well did it. But don't worry about ol' Elop, he got 25 million dollars upon selling the companies bones to his old employers. #CEOsdeservewhattheyget

BTW: I do think there are some fantastic CEOs out there, that earn every penny of their giant salaries. I just think they're an extremely rare beast.

Beasty · 22-12-2016 12:29AM

I know a couple of former FTSE 100 CEOs who each more than doubled the market capitalisation of their respective companies over a few years. That was beyond what was happing to the wider market and specific sectors to the tune of billions in each case. They were both very well rewarded through a combination of salary, bonus and share incentives. The shareholders never batted any eyelids over the (arguably staggering) amounts they were paid because they were more than handsomely rewarded through dividends and capital growth - exactly what they were investing for (many of the investors would be pension funds which in turn protects and/or enhances the returns for those who will ultimately draw those pensions)

I know another former FTSE 100 CEO who failed to deliver such results, and paid the price both in terms of a failure to pick up bonuses or share awards, but also in not surviving in his job very long.

Oafley Jones · 22-12-2016 12:38AM

Beasty wrote: »

I know a couple of former FTSE 100 CEOs who each more than doubled the market capitalisation of their respective companies over a few years. That was beyond what was happing to the wider market and specific sectors to the tune of billions in each case. They were both very well rewarded through a combination of salary, bonus and share incentives. The shareholders never batted any eyelids over the (arguably staggering) amounts they were paid because they were more than handsomely rewarded through dividends and capital growth - exactly what they were investing for (many of the investors would be pension funds which in turn protects and/or enhances the returns for those who will ultimately draw those pensions)

I know another former FTSE 100 CEO who failed to deliver such results, and paid the price both in terms of a failure to pick up bonuses or share awards, but also in not surviving in his job very long.

Market cap is such a dodgy metric though when it comes to judging performance. It can mask a whole load of ****e under the surface. I remember doing an interview for Anglo and the panel extolling the banks performance under their "young" CEO.

Edit again: Since I'm on banking.... Dick Fuld. Earned almost as same as Elop in the year before putting Lehman's in the ****ter. Wiki (the usual health warnings here) tells me that he earned close to half a billion dollars from his time there.

Earthhorse · 22-12-2016 12:48AM

Beasty wrote: »

I know a couple of former FTSE 100 CEOs who each more than doubled the market capitalisation of their respective companies over a few years. That was beyond what was happing to the wider market and specific sectors to the tune of billions in each case. They were both very well rewarded through a combination of salary, bonus and share incentives. The shareholders never batted any eyelids over the (arguably staggering) amounts they were paid because they were more than handsomely rewarded through dividends and capital growth - exactly what they were investing for (many of the investors would be pension funds which in turn protects and/or enhances the returns for those who will ultimately draw those pensions)

I know another former FTSE 100 CEO who failed to deliver such results, and paid the price both in terms of a failure to pick up bonuses or share awards, but also in not surviving in his job very long.

I know a former stastician who says three CEOs is not a valid sample size. Besides, no one is saying that all CEOs are overpaid; I'm sure Bill Gates and Warren Buffet deserve their wealth but there are many more who don't.

jimmycrackcorm · 22-12-2016 12:58AM

machiavellianme wrote: »

None of that is true. Jobs resigned from Apple the first time (after 2 attempts to do so and an attempted coup to oust him after he messed up overspending on the development of an expensive white elephant, the macintosh).
He then setup Next which was an even more spectacular failure at first.
His return to Apple was because Apple bought Next.

Well I would stand to be corrected but for this:http://abcnews.go.com/Technology/steve-jobs-fire-company/story?id=14683754

A power struggle erupted between Sculley and Jobs. In the spring of 1985 Apple's board sided with the CEO, removing Jobs from his command of the Macintosh group.

"They basically stripped Jobs of responsibilities and gave him an office that he referred to as 'Siberia.' Well, someone like Steve Jobs could not sit in Siberia," Deutschman said. "Jobs told his closest friends and colleagues that it was a betrayal."

Jobs left Apple and spent the summer of 1985 in a "midlife crisis, deciding what he wanted to do with his life and flirting with all kinds of possibilities" from entering politics to becoming an astronaut, Deutschman said.

As for coming back...

http://uk.businessinsider.com/how-apple-bought-next-and-steve-jobs-for-400-million-2016-12?r=US&IR=T

Apple bought Jobs' 11-year-old company, NeXT Software, for a $400 million.

When Apple announced the purchase, it was sort of vague what Jobs' role would be. The company said only that he would report to Apple's then-CEO and chairman Gil Amelio.

But Jobs wasn't built to report to someone else at a company that he founded. By September, Amelio was out and Jobs was named interim CEO. Then the "interim" was dropped. And the rest, shall we say, is history.

They bought NEXT because it was what Jobs built and as they say the rest is history...

I don't know why you want to argue my point that Jobs built up Apple to be one of the top three let alone the top ten most successful companies, instead you might argue my original point on thread topic instead that as CEO he is irreplaceable.

Unless you want to want to suggest that Tim Cook is as ingenious and not simply someone who got to take over an existing successful company.

22-12-2016 01:50AM

Earthhorse wrote: »

Who cares? Who cares if there's growing inequality in the economy? Who cares if there a golden circle in business propping each other up? Who cares if we don't actually live in a meritocracy whilst insisting we do? Jesus Christ, have you seriously so little interest in the world around you?

A few rich CEOs isn't causing inequality and your use of "golden circle" tells me this is just a rant based on feelings.

What inequality exactly is there in Ireland because of CEOs? A few score multi-millionaires with nicer houses than yours?

Based on these posts alone, I can guarantee I have more interest in what's going on in the world than you.

Earthhorse · 22-12-2016 02:18AM

Deleted User wrote: »

A few rich CEOs isn't causing inequality and your use of "golden circle" tells me this is just a rant based on feelings.

What inequality exactly is there in Ireland because of CEOs? A few score multi-millionaires with nicer houses than yours?

Once again, less equal societies are worse for the people who live in them. Here's an article that explains the phenomenon: http://edition.cnn.com/2011/11/06/opinion/wilkinson-inequality-harm/

The thread isn't about Ireland exclusively but about CEO pay but here's a report on the interconnected nature of Boards of Directors in Ireland suggesting governance could be improved: http://edition.cnn.com/2011/11/06/opinion/wilkinson-inequality-harm/

So my post is based on facts, not feelings.

Based on these posts alone, I can guarantee I have more interest in what's going on in the world than you.

Given that you're unaware of the phenomena I talk about above or even that the thread focus is not limited to Ireland I'm going to go ahead and void that guarantee.

Arcade_Tryer · 22-12-2016 03:23AM

Earthhorse wrote: »

I know a former stastician who says three CEOs is not a valid sample size. Besides, no one is saying that all CEOs are overpaid; I'm sure Bill Gates and Warren Buffet deserve their wealth but there are many more who don't.

Deserve is a meaningless term. Who is anyone to say someone else does not deserve their wealth which has been accumulated through legal means in the market?

I think Piketty's proposal of a global wealth tax is the only measure that could potentially work towards restoring some semblance of equality among human beings. Which is why it will never happen. But the theory is there.

22-12-2016 03:54AM

Earthhorse wrote: »

Once again, less equal societies are worse for the people who live in them. Here's an article that explains the phenomenon: http://edition.cnn.com/2011/11/06/opinion/wilkinson-inequality-harm/

The thread isn't about Ireland exclusively but about CEO pay but here's a report on the interconnected nature of Boards of Directors in Ireland suggesting governance could be improved: http://edition.cnn.com/2011/11/06/opinion/wilkinson-inequality-harm/

So my post is based on facts, not feelings.

Given that you're unaware of the phenomena I talk about above or even that the thread focus is not limited to Ireland I'm going to go ahead and void that guarantee.

You've linked to CNN twice by mistake but even then, that article is not about a few CEOs earning millions.

The problems in that article or with income inequality in general don't stem from overpaid CEOs. They aren't the reason poor crime-ridden estates exist. It's all a product of a broken system and you can't pin the blame on a fraction of the "1℅".

You seem to be focusing a lot on America and applying it to Ireland but their problems with inequality and wealth distribution are far far bigger than ours.

Do companies need to pay CEOs etc. so much?

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