Executive pay is not based on results.
 

One of the excuses for executive pay that has been that a good executive can make decisions that create hundreds or thousands of jobs. So what happens when the company loses thousands of jobs and stockholders lose equity. Why you give the CEO a raise, of course. According to this article the greatest factor influencing executive pay is "peer benchmarking." Companies contend that they have to pay more than the median executive salary to retain their talented executives. What happens if they are not that talented, though. Aw, heck, give them a raise and it will validate hiring them.

One thing that the folks walking Wall Street are well aware of is this:

"Since the 1970s, median pay for executives at the nation’s largest companies has more than quadrupled, even after adjusting for inflation, according to researchers. Over the same period, pay for a typical non-supervisory worker has dropped more than 10 percent, according to Bureau of Labor statistics."

I thought one of the primary elements of a market-based system is incentive to perform. If the leaders of our largest companies don't need to perform well to receive obscene amounts of money, where is the incentive to make the companies succeed?

Regards,

D-Ray

If the stock price goes up they get a bonus, if the stock price goes down they still get a bonus. Funny when you are the one running a company it doesn't matter anymore which way the company is heading.

A bonus is warranted because everybody else is doing it right?

Why is it OK for a CEO to be making 100's of times the salary of the average employee but let that same employee want a living wage with benefits then there is a problem!



Barney

I think a big part of the problem is there are only so many available CEO's to run these huge companies, that they can write their own contract and pay. Granted, a company could hire someone that hasn't beena a huge CEO, but then they are taking big risks. Companies don't like to look like they are taking that kind of risk, nor look like they are hiring someone that isn't up to doing the job. So, in order to get the big name, they have to pay stupid money.

A lot of companies aren't even basing raises for their employees on productivity and ability. A lot are giving a flat raise across the board. Not only can me and you see what's wrong with that, but I believe it causes a company to do even worse. The people that worked the hardest start backing off their productivity once they realize their hard work is getting them no where.

Really makes you wonder how these big CEO's can demand what they do, because it sure seems like their thinking is pretty flawed and they can't even see the simple...

Competent people for CEO? HP's board just hired Meg Whitman.:rolleyes:

Strikes me that it is a shining example of the Peter Priciple in operation

Why can't I get that to apply to me? Anyone need a high priced CEO? :D

Pete

When I worked for a non-profit the member companies sent their brass to the meetings, to say that their performance was under-whelming would not be an exaggeration.

I concur. In fact, you saved me some typing. I also think that just because a CEO did well in one industry doesn't mean they will do well in another. It does take some modicum of success to become a CEO in most cases. How much is someone like, say, Steve Jobs, worth to Apple? Ultimately, the BOD is responsible for the contract of the CEO.

I think she has a good track record unless I'm missing something:

Meg Whitman was the one that screwed up ebay with all the new rules then left for HP.

No no no no no no no.

This is simply not the case.

CEO's and the executives of major corps are hired on association. Often time these people are proven faliures but they "run in" the elite circle. (and it is a circle)

The trick is to break into this circle. It can be done two ways, the easy way, born into it and the hard way go to school, make friends with the kids "in the circle."