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“Let Them Eat Pink Slips”: CEO Pay Shot Up in 2010

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One of the big differences between private companies and public ones is private ones care a lot more about preserving their franchise, which includes their staff. In the old days of Wall Street (which I do not romanticize as a golden era, but man, it looks better than what we have now) partner would take bare bones pay in bad years to keep comp level for everyone else adequate. Similarly, in the 1970s and 1980s, when a company faced headwinds, and in particular, had to cut staff, it would be seen as a sign of poor leadership to a CEO to raise his pay.

Now that a two decades of executive pay increases way in excess of economic fundamentals and stock price increases have firmly established that shareholders be damned, CEOs have become even more aggressive in playing their “heads I win, tails you lose” game with stakeholders. Per the Guardian:

Chief executive pay has roared back after two years of stagnation and decline. America’s top bosses enjoyed pay hikes of between 27 and 40% last year, according to the largest survey of US CEO pay. The dramatic bounceback comes as the latest government figures show wages for the majority of Americans are failing to keep up with inflation….

This year’s survey shows CEO pay packages have boomed: the top 10 earners took home more than $770m between them in 2010. As stock prices began to recover last year, the increase in CEO pay outstripped the rise in share value. The Russell 3000 measure of US stock prices was up by 16.93% in 2010, but CEO pay went up by 27.19% overall. For S&P 500 CEOs, the largest companies in the sample, total realised compensation – including perks and pensions and stock awards – increased by a median of 36.47%. Total pay at midcap companies, which are slightly smaller than the top firms, rose 40.2%.

I don’t have a ready answer to this problem of CEO greed and narcissism. They operate in a world where this sort of behavior is applauded or at least rationalized, and broader public criticism is depicted as jealousy, rather than an accurate perception that CEOs are abusing their positions via their pay arrangements. More progressive tax rates would make a BIG difference, but we are a long way from that sort of change taking place.

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58 comments

    1. Nathanael

      American South slave owner mentality, too.

      The British slave owners for the most part agreed to get bought out and retire quietly.

      The American South slaveowners decided that they had to EXPAND slavery THROUGHOUT THE WORLD and that it was a POSITIVE GOOD.

      That’s the psychosis I see from the thief-CEOs.

  1. Bob Godnik

    So do you think that the bankrupt American Airlines will sell their $30M London town house that company executives use?

    “The plush residence in Cottesmore Gardens — recently named Britain’s 10th most expensive address by property firm Zoopla — could become a thorn in the airline’s side as it fights its way through bankruptcy.”

    “Confirming ownership of the house, American Airlines said it is used by the senior official in charge of its international business ‘and for corporate functions from time to time’.”

    http://www.chicagotribune.com/business/breaking/chi-american-airlines-has-30-million-london-town-house-20111214,0,4715479.story

  2. D

    You know what’s funny? It seems like these people are behaving as if they secretly believe the end is coming.

    I get that feeling when I am playing Tetris, or Bubble Bobble, one of those, and the game has reached that point where the puzzle line is closing in on the ceiling (or floor) and the mind just freezes up. Each small measure taken to solve the greater problem just becomes futile. I usually just fire off a few orbs or drop some bricks absently to end the game.

    I wonder if this is at all analogous to the sorts of processes that are going on in their minds. Maybe they are grabbing all they can as the house of cards totters. Could be wrong of course. Mere speculation and all that. Still…

    1. Sufferin' Succotash

      Maybe they are convinced that the roof is about to fall in and are out to grab as much as they can in the meantime. The idea is that the rest of us can live in a post-catastrophe Cormac McCarthy nightmare while they’re safe in heavily fortified undisclosed locations.

    2. psychohistorian

      My take on this is that the global inherited rich are having to offer more and more for the puppets to sell their “soul” to them to execute genocide on the rest of us.

      1. Ransome

        There is a team at the top and the CEO is a member but not the leader. The CEO implements strategy. Even CEOs are just workers.

      2. Nathanael

        On the whole, it is *not* the inherited rich. It’s narcissistic thieves.

        Yes, these are all people whose parents were upper middle class, but they mostly got to their current position by theft or toadying. Few are straight-up heirs, and usually their parents got there by theft or toadying.

        The “old rich” actually hate these CEO types, because the CEO types are wrecking the system, and the system was pretty comfy for the “old rich”.

  3. readerOfTeaLeaves

    The boards of the companies with CEOs making an average (for the Top 10) of $70m each this year ought to be publicly ridiculed, jeered, exposed, and derided. How does any board justify paying *any* employee $70m in a year when the world has seen global fury at inequality?

    Given today’s demographics and resource issues, this level of corporate pay seems clumsy, if not criminally stupid.

    The corporate boards make themselves look like a pack of synchophants.
    Shouldn’t the shareholders ought to be raising holy hell?

    1. Typing Monkey

      How does any board justify paying *any* employee $70m in a year when the world has seen global fury at inequality?

      If the CEO can make the company multiples of the $70m, what’s the problem?

      For example, Steve Jobs, while he didn’t take that salary (and instead screwed around with stock options), would have been more than justified in asking for a $70m year, I think.

      Given today’s demographics and resource issues, this level of corporate pay seems clumsy

      Agreed, but clumsy/stupid to whom? Your opinions don’t really matter to the guys who can get this pay (unless you happen to be a major shareholder and can drive them out, I suppose?)

      The corporate boards make themselves look like a pack of synchophants.

      They normally are.

      Shouldn’t the shareholders ought to be raising holy hell?

      YES!!!! But if the shareholders don’t want to bother (or if they agree with the pay structure), then it’s not really any of the non-shareholders’ business.

      1. ReaderOfTeaLeaves

        All of youroints are well taken, but it’s hard to show how anyone actually generates 70m, and one reason Jobs is admired is because he focused on the companies (options being one measure). Shared sacrifice rather than looting.

        I don’t give a damn if the boards don’t listen to my views,
        My comment was intended to point out that if you look at social, political, and economic events of 2011, to grant these compensations is tone deaf if any part of your business requires dealing with the public.

        The shareholders need to start raising hell.

          1. Nathanael

            Yeah, but they’re also sold by computer programs. Those things work entirely on short-term movements. Come time to vote for the board, the shares are on record as owned by (pension funds / mutual funds / banks / the CEO himself / his family trust).

      2. Jesse

        What if a CEO makes his company huge profits in multiples of 70 million, then in one quarter loses all those profits back plus more?

      3. E D Lowe

        So, in your world. Quarterbacks win games single handedly?!! Those other guys on an off the field are just there to justify the expense of the training facilities and the stadium, I suppose.

        An organizations top yapper in no way “earns the company” multiples of $70m.” I don’t care who the F* he is or how the corporate PR team has spun wild tales of his uncanny genius. The health and dynamism of the organization, given the market for their products earns the multiples. There is absolutely no rational justification for these levels of CEO compensation, except looting because they can, while they can.

  4. jsmith

    “I don’t have a ready answer to this problem of CEO greed and narcissism.”

    A deck of cards a la Rumsfeld’s deck of Iraq’s “most wanted”, including stats on greed, wrongdoing, how and where these people live, where they like to vacation and number of immediate family members would be a start.

    If these people are the paragons of our system, then how can they object to the public getting to know its national heroes a bit better, right?

    Why shouldn’t we able to more closely monitor and follow our idols?

    Why shouldn’t we know EVERYTHING about those we are told to emulate and admire?

  5. patrick

    In many cases the boards aren’t paying for performance, they’ve been paying for incompetence. A number of these top earners have presided over major falls in stock prices. So the shareholders get screwed twice, but they deserve it for tolerating this executive chicanery.

    1. Typing Monkey

      A number of these top earners have presided over major falls in stock prices.

      With all due respect, share prices are largely out of an executives’ control and will correlate with the market or industry far better than with actual corporate performance.

      Book value is a much better measure (or, if you are worried about the ability to manipulate that metric, some combination of book value and free cash flow, or sales, or comparison to industry peers, or whatever).

      In the end, of course, any metric can be manipulated, and so shareholders should be far more conscientious than they are.

      However, if a company is turning over its stock many times over a few month period, then I suppose there isn’t really any “owner” of the company, and I guess it’s sort of foreseeable that management would do what it could to grab as much of a share of the cash as it could.

      I’m not sure I agree with Yves’ about the ‘old’ days of Wall Street–I don’t think LBOs were any better than what’s going on now, for example.

      1. Patrick

        Doesn’t the dominant executive mantra quote increasing shareholder value as the be all and end all of corporate governance? That is the self proclaimed goal and therefore that should the starting measure of performance.

      2. Yves Smith Post author

        First, by the time LBOs were big, everyone but Goldman had gone public or been purchased by someone who was public.

        Second, the LBO guys were called raiders and weren’t seen as terribly respectable. Private equity firms are now a much bigger force than the LBO types, do deals that are every bit as levered, and are now treated with fawning respect. Ugh.

        The crookedness of days of yore does not look too bad compared to what we view as routine now.

        1. Jesse

          I know you didn’t like The Big Short Yves, but I thought the opening comments were amusing: When Michael Lewis wrote his first book about Wall Street in the 1980s, he never expected people to look back (10 or 20 years down the road) at ~5 million dollar bonuses for shaky performance as “quaint”.

    1. Nathanael

      I’ve been using this as a yardstick for investing for years — look for companies which pay their CEOs relatively little, and you’ve probably got yourself a good investment!

      It’s actually quite reliable, it’s good to see a study proving it. :-)

  6. Woodrow Wilson

    Company here is being driven out of existence. CEO and BOD had massive layoffs over the years, drove up stock, sold high, now almost nothing left. The kicker? The CEO was paid a nice little bonus just for coming on board (to eventually drive a decent corp into the ground). Saving the hard copies for nuclear options some day should they ever be relevant. An added note, one of the hand written scribbles from a fellow BOD member questions why CEO’s compensation is so high!

  7. Tao Jonesing

    I don’t have a ready answer to this problem of CEO greed and narcissism.

    Truly, Yves, that is the single most ignorant comments I’ve seen from you, and you are not ignorant. I must therefore ascribe it to faux populism intended to stir up and distract your “progressive” readers.

    As you well know, in public companies, CEOs do NOT set their own salaries. Instead, the Board typically appoints a Compensation Committee to do so (and for the entire executive team, as well). Compensation Committees typically articulate a compensation philosophy (e.g., we target the 50th percentile in total compensation among our peers), and they hire a third party consultant like Radford, Compensia or Mercer to provide the comparables and make recommendations about executive compensation according to the comparables and numerous other metrics.

    Since the CEO does not set her own salary, her greed and narcissism are completely irrelevant. Whatever she wants, it is not her decision. it is the Board’s, and the Board is ultimately accountable to the shareholders (at least in theory, a theory that will never be practiced because people like you aim the masses’ anger at the recipients of unjust rewards, not those who bestow those rewards).

    What everybody here needs to face is that the system is rewarding the CEOs with ever higher salaries because the results they are achieving are precisely what the system views as success. Think it through. What you view as failure the “system” views as success. That is the ONLY way to explain what Yves misdescribes as “greed” and to truly understand what we actually face, which is directed evil and not merely ignorant, irrational shit that just seems to happen.

    This is reality, folks. Your anger at CEOs is misguided as even many CEOs are but servants of the system, just like you but for the fact they work in the Master’s house instead of the Master’s fields.

    But you CAN change this dynamic. If you want to try and make a difference in companies whose CEOs you think are overpaid, buy a single share of stock in each of those companies, attend the shareholder meetings, and ask tough questions of the management and Board, who typically attend. Heck, consider putting your own shareholder initiative on the ballot of the Annual Meeting for a vote. Make sure to read the company’s by-laws and watch for announcements regarding the Annual Meeting to ensure you can meet the deadlines for shareholder ballot measures.

    If you’re really angry at CEO salaries, I just told you how to do something about them, something Yves’ faux populism prevents you from even thinking about. But if you enjoy revelling in your impotent fury against a false meme, by all means continue doing so. I’m sure Yves will help you, if that is your goal.

    But think about it. A share of BAC is $5.23. For less than a Benjamin Franklin, you can buy a share of Goldman Sachs. I invite you to Occupy Shareholder Meetings.

    1. Yves Smith Post author

      Tao,

      This is utterly disingenuous. Effectively, they do.

      Comp consultants are hired by the HR department. Yes, technically the board comp committed hires them, but the actual leg work is done by HR. Oh, and the same comp consultant often does lots of other “leadership development” and succession planning studies.

      Who recommends board director candidates? The COMPANY, meaning the CEO. We have some amusing examples of how this is abused (Steve Jobs having his architect on Apple’s board). They are all beholden to current management.

      You honestly buy the idea that boards are not creatures of management in public companies? What planet are you from? The only time you see obstreperous board members is via acquisition, such as Ted Turner at Time Warner.

      And your idea that shareholders can do squat is plain dishonest. Literally terabytes of academic papers have been written on shareholder disenfranchisement. Tell me exactly the last time a dissident slate was elected. The very fact that pay is negatively correlated with performance is proof. Wanna be activists with reputations and reach like Calpers get nowhere. They have far more sway than your frankly idiotic suggestion of buying a share and trying to make noise at shareholders meetings.

      Try reading Amar Bhide’s article “Efficient Markets, Deficient Governance” for staters. He describes how deficient corporate governance is an INHERENT feature of our system of anonymous, arm’s length share ownership. Bhide thinks the answer is banning public share ownership.

      Don’t claim I don’t what is at stake here. Just because it is not as crass as a CEO asking for a number and a board signing off on it does not mean we do not have a regime that caters to CEOs’ overreaching pay desires. Look at how board have revised option exercise prices downward when stock prices have fallen! Would this ever happen in a truly arm’s length arrangement? A deal is a deal in most other walks of life.

      I’ve discussed at much greater length elsewhere how the widespread practice of board setting pay targets at median for a comp group or higher guarantees escalating pay. This is a looting machine.

      You accuse me of operating in bad faith and of trying to lead on my readers. Bullshit. You seem to believe the PR of corporate governance as opposed to what really goes on. I have plenty of tolerance for good faith arguments, but will not give anyone a platform to make baseless personal attacks on me or any of the bloggers here.

      1. Peter T

        Yes, you write convincingly. What is your solution? I see only the government writing laws as strong enough to change anything to the better, would you agree? Which laws would you like to have introduced or to have changed? How could the new laws empower shareholders like CALPERS on the board?

        I could think of some laws:
        - Make the board a group of stakeholders, not shareholders, and let one third of the board elect by the workers (German model).
        - Once and for all, separate chairmanship from the CEO position (law in many countries). Opponents cite the American special history, but should show first that the speciality helps the stakeholders. I would suggest also preventing former CEOs from becoming chairpersons of their old company.

        1. Nathanael

          I would suggest the prohibition on the issuance of free voting stock or stock options to CEOs and board members.

          I would further prohibit any issuance of stock without *explicit* shareholder consent to that particular transaction.

          CEOs use these powers to dilute the other stockholders who actually had to pay for the stock, thus making it impossible for the other stockholders to control the company.

          Second, I would advise prohibiting anyone but the *underlying* owners from voting corporate stock. So, if a corporation owned the stock of a subsidiary, the Board of Directors would have no power to vote the stock of the subsidiary — the underlying shareholders of the top corporation would do so. Likewise, mutual fund managers, brokers, and pension fund managers would be prohibited from voting stock, and forced to ask the people in whose interest they held the stock for voting instructions.

          Third, I would provide a guaranteed right of communication between shareholders, so that any shareholder could contact any other group of shareholders, or all of them, and I would prohibit the corporation from mailing proxies on behalf of the incumbent board. The board members would be forced to run campaigns themselves. The corporation would be permitted to mail proxies if they were *neutral*, listing every stockholder who wished to run for the board on a neutral basis.

          Corporate democracy in other words.

          Finally, I would require corporations to have a specific charter, to do something other than “make money”, and have a system for revoking the charters of corporations which did not fulfil their specific obligations.

          This is a rather complicated set of proposals which would basically just get us back to early 19th century corporations. Someone can probably come up with better proposals, but this would reverse the sequence of changes which created the current CEO monsters.

      2. Nathanael

        “Try reading Amar Bhide’s article “Efficient Markets, Deficient Governance” for staters. He describes how deficient corporate governance is an INHERENT feature of our system of anonymous, arm’s length share ownership. Bhide thinks the answer is banning public share ownership. ”

        I’m a little unclear on what Bhide means. If Bhide means requiring all shareholders to be named, involved shareholders of record and having stock purchases and sales be long, slow transactions, that seems good.

        If it means requiring approval for stock ownership changes by vote of the other owners, I’d even back that (that’s how co-op membership rules sometimes work, and how many clubs operate.) I can’t imagine actually totally prohibiting people from selling their corporate stock interests to each other, though, which would be “public ownership” by the weakest definition.

    2. Francois T

      Tao,

      The short of it is: On what planet do you live?

      Just google the topic and you will quickly realize that CEOs run the compensation show.

      Come on now! You think they get all this money year in year out strictly on MERIT??

      Mbwahahahahahahaha!!

    3. Jack Parsons

      Haha! In fact, narcissism is a major contributor to the CEO pay binge.

      Before Sarbannes-Oxley, C-level pay was secret, for all the usual reasons that salaries are secret. I’m not sure if it was Sarbox itself, or something else in the early Oughts, but suddenly public companies had to publish CEO pay. And, narcissists that they are, every one had to make more. If you paid them all $5, one would demand $6. And if you made CEO pay secret again, the market might go ffffft like a bad souffle.

      1. Peter T

        Better the narcissism is satisfied by printed numbers than by ostentatious consumption. One might hope that the CEOs have better things to do with their money, e.g. supporting worthy causes. (Unfortunately, the Republican party might be seen as a worthy cause.)

    4. JTFaraday

      “This is reality, folks. Your anger at CEOs is misguided as even many CEOs are but servants of the system”

      You have the system/servant thing completely inverted. CEO looting is the system, whatever the business ostensibly was has become a mere pretext for looting. They took their cue from finance in this regard. Whole companies are cash out financing vehicles for the executive class.

      Compensation consultants are just part of the culture of enablers that CEOS have created around themselves, dependent on such enabling for their own paychecks. Yes, that makes it more of a systemic problem, but the whole culture is set up to benefit a relative few.

      You could probably convince the compensation consultants to do any number of things in the business world, but corporate looters themselves are only going to get their deal one way, so they– and the mentality and strategies they take from the finance sector– are certainly still the crux of the matter.

  8. Jesse

    If you’re going to pursue tax increases, how about ones that are very specific to CEO pay? For example, a company can pay it’s CEO $100 million, but then it has to pay match 100% of that ($100 million) in taxes. It’s kind of like a “luxury tax” for business.

  9. F. Beard

    What if the government backed/enforced counterfeiting cartel, the banking system, was effectively abolished? Would not corporations be forced by market pressure to use their own common stock as money? But why would anyone accept accept common stock money? Wouldn’t the rewarding of the CEO for failure by the corporation be a reason NOT to accept that corporation’s common stock money?

    And if corporations had not a counterfeiting cartel to borrow from, would that not drastically limit the bonus games the management could play?

    1. F. Beard

      Also, without the counterfeiting cartel, it is likely workers would be paid with common stock and thus have a say in the corporation they worked for. It is unlikely that they would vote for overpaying the CEO or keeping on a loser. Nor would the workers be likely to vote for their own layoffs. And even if some were let go, at least they would share in the profit from any productivity gains acquired thereby (assuming they had savings in the common stock money).

      1. Heavy Armor

        I put no faith in this option. Companies like Enron did just that. And then the BOD, knowing what was coming around the corner, dumped the stocks every which way, including on their employees. You can guess what happened when the Enron stock bubble burst shortly thereafter.

        1. Nathanael

          Common stockholders actually have zero power over the boards of directors at large publicly traded companies. This is what defeats F. Beard’s plan and would have to be fixed before it could be useful.

          It has not been fixed because the boards really like being able to write their own salaries and like being totally unresponsive to anyone.

  10. F. Beard

    The analogy of our money system with cancer is very close, I would bet. And the ironic nature of cancer is that as the cancer destroys the body, it destroys its own means of survival.

  11. vlade

    I believe that technical answer is simpler than we believe, the problem is political will – which means it ain’t gonna happen anytime soon.

    The technical answer is to cap the amount that is covered by limited liability. Make it say 10m, which is plenty for entrepreneurship purposes (which the limited liability is supposed to foster).

    Anything over that would be unlimited liability, and make any part of compensation that goes over say 10 median of the company payable in (dividend bearing) unlimited-liability class of shares.

    Make any debts incured by holding such shares non-bankruptcy resolvable (hey, student loans are, so why not this?), inheritable (say 3 generations), and having first claim on any income or benefit-in-kind (to defeat trusts).

    Or some other imposition of unlimited liability.

  12. Rcoutme

    Not that they would, but congress could do the following:

    Way to fix the obscene compensation in corporations

    First off, we are talking only about corporations that are publicly owned and operate in more than one state (or operate internationally). Such corporations are supposed to be regulated by the federal government due to interstate commerce clause in the constitution. The reason it should only apply to publicly owned corporations is that if someone privately owns a corporation, he is entitled to its profits as a matter of fairness.

    1. No one is allowed to have a salary (including bonuses—see exceptions below) more than 10 times (or 20) that of the lowest paid person working for the corporation. This includes those who are ‘contracted’ to do work for the company and spend the majority of their time (or the most time of any place they work in similar contract) for that company (think contracted cleaning crew, etc)
    2. Exceptions to the above include those who cause the corporation to immediately realize the fruits of the their labor. Examples would include artists (singers, etc), professional athletes and sales people who sell items that allow the corporation to get the money immediately (not some promise of money in the future). Since these people cause the corporation to get the money immediately, they should be allowed to get their commision (or whatever) immediately.
    3. Employees may be given stock options that are set at the price when the options are issued or the price of the stock when the employee got his job—whichever is HIGHER! For those who don’t know how stock options work: you get the right to purchase stock at a guaranteed price, regardless of what the price at the market is. This would allow top management to earn those bloated salaries—but only if they get the corporation’s stock to rise in price!
    4. The stock options offered above can not be used until three years after they have been awarded. This will make it that management will not make short-sighted, potentially dangerous or risky decisions since much of their compensation will depend on the long-term viability of the corporation.

  13. DP

    Looks to me like the only way to deal with these corporate looters is to go back to early 1960′s tax rates (i.e. 80-90%) on the top 1/10 of 1% incomes.

    Just heard an astounding figure a couple of days ago, the top 1/10% of 1%, i.e. 1 of 1000, are making 1/8 of national income.

    1. different clue

      DP, I was going to suggest this until I saw that you already did. I had remembered reading that under the Eisenhower-era graduated progressive tax-bracket structure,
      very few Corporate Officer Compensation Deciders decided to pay a Corporate Officer a high enough salary that a lot of that salary got taxed away, because Corporate Officer Compensation Deciders saw no point in paying that much tax money to the government via the mechanism of paying the Corporate officers enough that much of that pay fell within the majority-to-the-IRS brackets.

      Restoring the Eisenhower-era tax bracket schedules would be a worthy experiment to see how Corporate Officer Compensation Decider-Groups responded.

      1. Nathanael

        It needs to be done. Restoring the Eisenhower tax brackets (adjusted for inflation, naturally) would actually solve most of the problems with CEO behavior.

        However, how the hell do we get our governments to do this?

  14. ep3

    Yves, i work with a lot of small businesses, especially restaurants. I see so much of them that will increase their pay or the company covers expenses for them and then they tell employees that sales are down so pay raises are not feasible. In fact, most companies try to operate from an S-corp tax position. That way, all profits flow to the shareholders tax return(s) (most are so small that they have only 1 or 2 s/holders). Even our C-corp clients will bonus out profits to officers and maintain just enough profit to make the bank happy. But the feeling is a) why pay my employees more than the next guy and cut into ‘my’ getting all the money and possibly making the company go broke. it was my ‘hard work’ being owner that makes this company successful. b)then when they have managed the company to the point that the P&L statement shows ‘very little profit’, they can turn to the employees and say ‘we aren’t making very much money’.
    Part of the problem is the tax laws. Actually most of the problem is that. See, since corporate rates are higher than personal, it is better benefit to the company and the owner to flush the profits thru to their personal returns, where the rates are lower. So what these companies do is pay themselves rent and bonuses and then instead of paying 35% on the money, they pay 18%-25%.
    The other problem is arrogance. ‘I am a business owner so I must be smarter than you and so I should make more than u’. And they will bankrupt the company before they put a dime in it or cut one of their “perks”. And they will say to employees “well look, we aren’t making any money…”. But when u look back at statements, you can dig into the detail and find where they have extracted excess payments. So, what has happened to those funds? Well, since they have been extracted by the s/holder as profits/rents/etc., they no longer are funds available to fund the business.
    This leads into a disagreement I have with my uncle, who is a small business owner. I say to him that by having the company, his personal finances and liability is supposed to be separated from the business so that should the business go bankrupt, he isn’t injured. Say in the profit years, he pays himself large bonuses, buys cars, etc. So when the low years come, the company is hurting. It goes bankrupt. But he took all the profits. But he wants to say the company is his to do as he wants to. Yet he legally wants the company to be independent, to have a mind of it’s own, with the goal of making profits. I say to him, if the company did operate independently, wouldn’t it say to itself ‘my sustainability cannot last potentially if i give out all these profits. i, the company, need to save these for a rainy day.’ But my uncle acts as that brain. And all that prevents him from bankrupting the company is his own personal desires. Say he makes $1 billion in one year. He could take that and run, while the front desk girl, who is a single mom with 3 children, loses her job and her home. Would the company say “i think it wise to give the manager all the profits even tho the economy is in a rough time”?
    So, my point is that we have issues in people’s attitudes, we have issues with our tax rates, and we have issues with the corporate/business entity. Sometimes people want them separated, and sometimes we want them put together.

  15. thelonegunman

    total realised compensation – including perks and pensions and stock awards…

    pensions? what the fuck are those / is that???

    i thought only excessively and extravagantly paid teachers, firefighters, and other public employees ‘enjoyed’ those (in return for their smaller than ‘industry’ salaries…)

    oh wait… that’s just the rethuglican AynRandian meme meant to divide the working class between those ‘better off’ (i mean – they have PENSIONS… next thing you know you’ll want health care, and paid vacations, and weekends off! let alone safe working environments and child labour laws…)

  16. diptherio

    I think Thorstein Veblen had a valid point in his _Theory of Business Enterprise_, when he stated that industry is run for the sake of business and not the other way around. The business man/woman is in the game for pecuniary gain, not to create any useful product or service. It makes little difference to a CEO businessperson if their firm goes under or horribly ruins the lives of thousands of people, so long as their own pecuniary gain is realized. About the only sensible thing “Tao” had to say in his/her/its post was that what looks like failure from the outside may well be success from the perspective of the business people involved.

    “The economic welfare of the community at large is best served by a facile and uninterrupted interplay of the various processes which make up the industrial system at large; but the pecuniary interests of the business men in whose hands lies the discretion in the matter are not necessarily best served by an unbroken maintenance of the industrial balance. Especially is this true as regards those greater business men whose interests are very extensive… Gain may come to them from a given disturbance of the system whether the disturbance makes for heightened facility or for widespread hardship, very much as a speculator in grain futures may be either a bull or a bear. To the business man who aims at a differential gain arising out of…disturbances of the industrial system, it is not a material question whether his operations have an immediate furthering or hindering effect upon the system at large. The end is pecuniary gain, the means is disturbance of the industrial system… so far as touches his transactions in this field it is, by and large, a matter of indifference to him whether his traffic affects the system advantageously or disastrously. His gains (or losses) are related to the magnitude of the disturbances that take place, rather than to their bearing upon the welfare of the community.

    The outcome of this management of industrial affairs through pecuniary transactions, therefore, has been to dissociate the interests of those men who exercise the discretion from the interests of the community…Broadly, this class of business men have an interest in making the disturbances of the system large and frequent, since it is in the conjunctures of change that their gain emerges.”
    ~Thorstein Veblen

  17. Kunst

    The largest single problem with corporations is that in most cases they have no real owners. A publicly traded corporation is owned by mutual funds, hedge funds, maybe a few large stockholders (e.g., founder families), and a lot of small stockholders. Yes, they all care about the stock price, but in most cases, if they aren’t happy with how things are going, they just sell their stock. They have little interest or practical method to improve or replace management. The CEO works for the board of directors, which is effectively selected by the CEO and the board of directors. Corporate shareholders have about as much control of corporations as the Chinese people have of China. Corporate management does not have the same interest as owners, which is why they often wind up plundering instead of working in the company’s interest. Another word is parasite.

  18. Nathanael

    “I don’t have a ready answer to this problem of CEO greed and narcissism. ”

    Given that you’ve ruled out progressive tax rates due to the CEOs owning the legislature, that also rules out restoring shareholder control of companies. Both are prevented by the same political capture. So are any other “legal” methods.

    So, the choices are revolution to break their political power, or assassinations to make them fear for their lives. Doesn’t look savory, does it? I’m not going to start doing either, I’m busy…

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