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Executive pay may be small compared to the corporate balance sheet, but the level it's at allows for and encourages bad behavior. 1. The extreme disparity betw
by pw0ncakes 17y ago
Executive pay may be small compared to the corporate balance sheet, but the level it's at allows for and encourages bad behavior.
1. The extreme disparity between CEO pay and other vital executives encourages people to backstab in order to ascend the hierarchy. So "work" for those who are in line to be CEOs is more about jockeying for position and trading favors than about building a company.
2. In addition to (1), such disparities are bad for morale, especially when the CEO is a "hired gun" instead of someone who has been part of the company for a long time.
Except in athletics, where talent is objectively measurable, the "star system" tends to piss off everyone but the stars, and let's be realistic: non-stars are 99% of people, and probably 3/4 of those who would be considered objectively the most competent.
3. When the CEO makes $500,000/year, he's drawing a good salary but still has the incentive to build a legitimately strong company for the long-term. When he has a "performance bonus" that will give him fuck-you money in 12 months if he plays his cards right, his incentives are in the short term.
4. When there are massive discrepancies in pay between the bosses and the people they are managing, the social class and lifestyle disconnects become problematic and can damage morale. This is why the best CEOs try to appear middle-class in terms of dress and work habits.
CEO pay is at such a level that it actually brings lower quality of management. This is what's truly alarming. Decades ago, when CEO pay was much lower, American companies were well-managed and produced great products like (imagine this for a second) cars that people actually wanted to buy. Now, big-company CEOs command stratospheric salaries and generally such ass. This is because executive pay is so high that it has pushed these people completely out of touch with reality.
- tullius 17y agoCompanies are much better managed now than they were a few decades ago. Think about the fact that corporate raiders were able to buy large companies in the 80's, split them apart and sell their constituent lines of business for more than the companies were previously worth. CEO pay has simply increased in line with the market capitalization of the largest public companies.
- pw0ncakes 17y agoThe stock market is a poor arbiter of whether a business decision is good for the long run. Traders are good at outguessing each other in the short term, but have no sense of the long term.
- CWuestefeld 17y agoAgain, how about a citation? On what basis do you believe that they're not reflecting the long term?
- CWuestefeld 17y agoNothing but supposition. Some of what you say is plausible, but can you offer any evidence that this is actually happening? Let me offer you another possible explanation. When people are making this much money, it's not really about the money at all; they've already got FU money, and they're taking what they can get only because that's the arbiter of where their skills are most needed. Instead, they're doing what they do because they really like the business, or the challenge, or they really want to contribute something to society. I know the CEO of my company (not Fortune 500-sized, but nothing to sneeze at), and I'm absolutely certain that this is the reason that she does it.