Executive pay: Don’t blame the CEO
Yes, huge stock-based compensation packages have distorted the incentives for executives. But CEOs aren’t to blame, their bosses are.
http://management.fortune.cnn.com/2011/11/16/dont-blame-the-ceo/
Just like ball players asking for huge salaries, CEOs are just out trying to maximize their earnings. The dummy isn’t the one asking for the huge value (though you can look really stupid if you don’t get it), the dummy is the one who says ‘yes’. It always baffles me that sports team owners want to have salary caps. If you want to pay your players less, simply refuse to agree to higher terms! Of course, if other owners are going to pony up bigger bucks then you lose in a bidding war, but to me the real dummy is the one who gets involved in a bidding war to begin with. The same for corporations and the boards that hire their CEOs. They get into the ball player mentality and insist on hiring a specific person to the exclusion of all others. If that person insists on a huge salary, then to get him (notice how it is always almost ‘him’ (and white to boot)?) they have to pony up the bucks. The board may sugar coat it a bit by calling the compensation ‘options’, but when the options pay a certain amount no matter what the stock price, it is just compensation in another name.
Of course the true corruption is that board members are all part of the (in)famous 1% club and know that they won’t suffer a whit if they double the CEO’s salary (besides which, the CEO under question is probably a board member for other companies, so you scratch my back and I’ll scratch yours), so up and up and up it goes. Given the rather abysmal record most of these overpaid buffoons, it is hard to argue they are worth the increased bucks over an average MBA puke fresh out of school, at least the MBA punk is likely to have a wee bit of humility and might actually seek advice and justification for decisions rather than making them arbitrarily.
