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My understanding is a CEO's main capability that earns them a large salary is being able to influence company salaries.
by yters 7y ago
My understanding is a CEO's main capability that earns them a large salary is being able to influence company salaries.
- munk-a 7y agoMost CEOs are quite detached from managing company salaries and have delegated that responsibility - CEOs do work, sure... but not a proportion of work in line with their earnings.
- yters 7y agoHow much role do CEOs have in directly determining their personal salary?
- kgwgk 7y agoDirectly? Not much, supposedly. But maybe they sit in the boards determining the salaries of the board members who determine them.
- yters 7y agoYes, that's my simple explanation for the hugely disproportionate salaries CEOs earn. Two possibilities: 1. They are somehow superhumanly increasing the company's bottom line 2. They target companies with enormous amounts of money and intentionally influence their salary to become very large, independent of their job performance Insofar as #2 is possible, that seems the most plausible explanation for large CEO salaries. Unless the people determining the CEO's salary are somehow completely firewalled off from his influence, it is hard to see how #2 is not possible.
- s1artibartfast 7y agoOr 3. CEO's are superhumanly capable of DECREASING the company's bottom line. The board is paying to minimize their risk of ruin. With consistent good management, mature organization should hope to see incremental growth. Bad management can destroy a company overnight.
- Yetanfou 7y agoCEO's sit on board for other companies where they get to decide on the salary for CEO's who sit on the boards of companies where they get to decide on the salary for CEO's who... well, you get it by now. Like the revolving door between politics and business these people generally do not bite the hand that feeds them so generously.
- lazerpants 7y agoCEO salaries are typically determined by the board of advisors or at smaller companies, by the company's investors.
- Doubl 7y agoIn the UK, company directors have also vastly outpaced everyone else in earnings growth since the '80s. Their compensation is decided by a remuneration committee. The remuneration committees are composed of company directors from other companies to give them "independence", shareholders play no part in the process. It's a you scratch my back and I'll scratch yours thing. Why don't the shareholders object? Because the shareholders are mostly funds who similarly have directors.
- kgwgk 7y agoThey also compare the remuneration with the one provided by peers. Of course every CEO is above average and deserves to be paid better than the industry average. Unsurprisingly, the average compensation increases year after year...