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The problem with this is that the CEO gets the same payout if he does a good job and things don't work out or if he fantastically mismanages the company.
by cageface 15y ago
The problem with this is that the CEO gets the same payout if he does a good job and things don't work out or if he fantastically mismanages the company.
- protomyth 15y agoI think a lot of the problem with CEO failure come from risk adverse boards being unwilling to try someone new as opposed to the accepted stable of CEO candidates. Small pool equals big compensation even for failure.
- tsotha 15y agoThere's more to it than that. Board members of large corporations tend to be CEOs of other large corporations. Not only do they see each other at charity events and such, they have a vested interest in not being too hard-nosed about compensation. The question is why the shareholders put up with it, and I don't have an answer to that question.
- protomyth 15y agoBecause it sounds like the safe, experienced play. It does work for a lot of companies (says something about the companies more than the CEO), and I would suppose it is easier to make deals to keep the company going when you have all the "club" contacts. When it fails, it fails in amazing spectacular ways. I guess many should be sorta happy since it allows untried upstarts to disrupt the market and truly well run companies to expand. I feel sorry for all the people caught up in the fail.
- yummyfajitas 15y agoOr you can give him a variable payout - $6M if he fails, $20M if he succeeds. This is a far more common situation.
- cageface 15y agoSure, but there's failure with best effort and then there's the fiasco. Not enough is done to punish the latter, IMO.