Posts Tagged ‘Executive pay’

Overall, CEOs don’t earn their big paychecks

April 14, 2014

o-CEO-PAY-570

The following is by Mark Symonds for Forbes

It isn’t every day that academic research comes along to tell you something you really wanted to hear and that you suspected was the truth all along.  In this case it’s about the long running debate around top executive pay.

A recent paper by J. Scott Armstrong of the Wharton School and Philippe Jacquart of France’s EMLYON, seem to have finally established that paying top dollar simply doesn’t get a better job done.  And, in fact, it might actually get a worse one done.

According to Armstrong and Jacquard, while there is plenty of evidence that financial incentives can be effective in motivating people to do mundane and boring tasks, individuals do the more interesting and challenging stuff…well, because it’s interesting and challenging.

Perversely, they say, very large financial incentives may actually hinder top performance. The paper argues there is strong evidence that individuals can become fixated on incentives and either become limited in their thinking, unable to digest and adopt new ideas or alternately become convinced that they will achieve the goal automatically so do not need to try as hard as they might otherwise.  Whatever the outcome, every other stakeholder from the more modestly earning employee to the corporate stockholder loses out.

And finally the research also suggests that we might not really be getting the brightest and best talent at the top because the tools and processes used to identify candidates are either limited or downright faulty

There is simply too much emphasis on past performance, personal recommendation, unstructured interviewing, an unwillingness to ask really difficult and searching questions and that more dangerous selection criterion of all – gut instinct. Worryingly, it seems that the headhunters and in-house recruiters charged with hiring occupants of the corner office may be relying too much on perception and too little on good, hard facts.

The paper points out that CEOs who win prestigious industry awards constantly out-earn those that don’t.  Yet the stocks of the companies the award winners head up consistently under-perform in comparison to those of their less publicity hungry peers.  Perhaps because the latter spend their time running their businesses well instead.  [snip]

Unlike many academics, who might shy away from coming up with a solution, EM Lyon’s Jacquart is one willing to give the obvious if uncomfortable answer – namely that current incentive models need to be abandoned and overall executive pay should be reduced.

And he’s also ready with a counter to those who will doubtless argue that this will make it impossible to recruit the right people and bring major banks and corporations crashing to the ground.

“Yes, of course this may make it more difficult to recruit very senior individuals from outside an organization, at least in the short term. However it would force businesses to focus more on the development of the talent it already has, the talent that is more likely to be more loyal to and understanding of its aims, goals and methodologies.”
[snip]

via Big Company CEOs Just Aren’t Worth What We Pay Them.

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The passing scene: Links 11/25/13

November 25, 2013

Switzerland votes against a cap on executive pay by The Guardian.

Voters in Switzerland voted, by a 2 to 1 ratio, to reject a proposed law that would have limited executive pay in a corporation to 12 times that of the lowest-paid employee.

Foxconn invests $40M in Pennsylvania to tap research, talent by Michael Kan for Computerworld.

China-based Foxconn, the world’s largest manufacturing employer, plans operations in the United States.   Presumably, there won’t be nets around the buildings to catch suicidal employees.

Toxic Lakes From Tar-Sands Projects Planned for Alberta by Jeremy Van Loon for Bloomberg News.

Some day the bitumen in Alberta will be exhausted, but the toxic wastes in artificial lakes will be there indefinitely.

 

Gannett’s rich reward for a failed CEO

October 25, 2011

Gannett Co. Inc. owns the Rochester (NY) Democrat and Chronicle, where I worked from 1974 to 1998.  Newspaper work was good to me, and Gannett was good to me, but I’m glad I was able to retire when I did.  I am reminded why I’m glad as I read this by David Carr in the New York Times.

Craig A. Dubow

Craig A. Dubow resigned as Gannett’s chief executive [on Oct. 6].  His short six-year tenure was, by most accounts, a disaster.  Gannett’s stock price declined to about $10 a share from a high of $75 the day after he took over; the number of employees at Gannett plummeted to 32,000 from about 52,000, resulting in a remarkable diminution in journalistic boots on the ground at the 82 newspapers the company owns.

Never a standout in journalism performance, the company strip-mined its newspapers in search of earnings, leaving many communities with far less original, serious reporting.

Given that legacy, it was about time Mr. Dubow was shown the door, right? Not in the current world we live in. Not only did Mr. Dubow retire under his own power because of health reasons, he got a mash note from Marjorie Magner, a member of Gannett’s board, who said without irony that “Craig championed our consumers and their ever-changing needs for news and information.”

But the board gave him far more than undeserved plaudits.  Mr. Dubow walked out the door with just under $37.1 million in retirement, health and disability benefits. That comes on top of a combined $16 million in salary and bonuses in the last two years.

via NYTimes.com.

And also this, by Peter Lewis, formerly of the Des Moines Register, New York Times, Time magazine and Stanford University journalism school.

Mr. Dubow … required many employees to take unpaid leaves of absence, and instituted pay freezes.  He referred to this as “increasing workplace efficiencies.” … …

Mr. Dubow managed to keep earnings high, according to analysts, by cutting costs (i.e. people) more aggressively than any other company in the media industry.  Gannett refers to this as “workplace restructuring.” … …

Gracia Martore, who replaces Dubow as CEO, said: “We will continue our relentless quest to provide trusted news and information and will actively support the people and businesses in the communities we serve.”

These people are lying.  The corporate goal is not to serve the consumer; it’s to maximize profits and pay packages for top executives.  Can anyone argue that Gannett newspapers and journalism are better today, and that news consumers are better served?

How did Mr. Dubow and Gannett serve the consumer?  They laid off journalists.  They cut the pay of those who remained, while demanding that they work longer hours.  They closed news bureaus.  They slashed newsroom budgets.  As revenue fell, and stock prices tanked, and product quality deteriorated, they rewarded themselves [with] huge pay raises and bonuses.

via Words & Ideas.

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Can we outsource CEOs to India?

August 10, 2011

Click to view

I agree with the sentiments of the cartoonist.  However, in point of fact, corporate executives in India don’t work for peanuts, either.  CEO pay in India has doubled in the past five years and is rising at the rate of 15 to 20 percent a year.  I don’t know, but I wonder if the economic contribution of CEOs in India twice as great as it was five years ago.

Click on Executive Salaries in India and the West Will Be Equal By 2013 for information on CEO pay in India.

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Who’s getting the cookies?

March 29, 2011

A commenter questioned whether the joke about The CEO, the Tea Partier and the union guy accurately described who’s getting the cookies.

Well, there are plenty of cookies being baked, but the majority of working people aren’t getting them, and this includes government workers.

Double click to enlarge

Double click to enlarge

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