CEO Pay Often Not Linked to Performance

[Big Fitz]

Reload this Page CEO Pay Often Not Linked to Performance

Yeah....And?

During my brief foray into working in the corporate world, almost nobody's pay was based upon performance...In fact, if you performed too well and acted like you gave a shit, you'd usually run afoul of middle management types who had become fat, lazy and complacent in the corporate bureaucracy.

So what else is new?

Aside from you defending that bullshit on a daily basis..while they play with Tax Payer dollars like monopoly money..

Not much?

crazy thought... stop subsidizing them and bailing them out.

Anyone gonna salute that flag?

Crony Capitalists should be in jail not on blue ribbon commissions, AND their goddamn paid flunkies in congress.

 

[Ava]

There is virtually no relationship between relative CEO pay and relative corporate performance. One reason is because CEO's aren't paid based on performance. They are paid relative to how other CEOs are paid.

THOUSAND OAKS, Calif. — As the board of Amgen convened at the company’s headquarters in March, chief executive Kevin W. Sharer seemed an unlikely candidate for a raise.

Shareholders at the company, one of the nation’s largest biotech firms, had lost 3 percent on their investment in 2010 and 7 percent over the past five years. The company had been forced to close or shrink plants, trimming the workforce from 20,100 to 17,400. And Sharer, a 63-year-old former Navy engineer, was already earning lots of money — about $15 million in the previous year, plus such perks as two corporate jets.

The board decided to give Sharer more. It boosted his compensation to $21 million annually, a 37 percent increase, according to the company reports.

Why?

The company board agreed to pay Sharer more than most chief executives in the industry — with a compensation “value closer to the 75th percentile of the peer group,” according to a 2011 regulatory filing.

This is how it’s done in corporate America. At Amgen and at the vast majority of large U.S. companies, boards aim to pay their executives at levels equal to or above the median for executives at similar companies.

The idea behind setting executive pay this way, known as “peer benchmarking,” is to keep talented bosses from leaving.

But the practice has long been controversial because, as critics have pointed out, if every company tries to keep up with or exceed the median pay for executives, executive compensation will spiral upward, regardless of performance. Few if any corporate boards consider their executive teams to be below average, so the result has become known as the “Lake Wobegon” effect.

It wasn’t until recently, however, that its pervasiveness and impact on executive pay became clear. Companies have long hid the way they set executive pay, but in late 2006, the Securities and Exchange Commission began compelling companies to disclose the specifics of how they use peer groups to determine executive pay.

Since then, researchers have found that about 90 percent of major U.S. companies expressly set their executive pay targets at or above the median of their peer group. This creates just the kinds of circumstances that drive pay upward.

Moreover, the jump in pay because of peer benchmarking is significant. A chief executive’s pay is more influenced by what his or her “peers” earn than by the company’s recent performance for shareholders, according to two independent research efforts based on the new disclosures. One was by Michael Faulkender at the University of Maryland and Jun Yang of Indiana University, and another was led by John Bizjak at Texas Christian University.

“Peer benchmarking has a significant influence on CEO pay,” Bizjak said. “Basically, you can’t have every CEO paid above average without pay ratcheting upward over time.”

Cozy relationships and ‘peer benchmarking’ send CEOs’ pay soaring - The Washington Post

There has been a fundamental breakdown in corporate governance in America.

The practice has persisted because corporate board members, many of whom have personal or business relationships with the chief executive, have been unwilling to abandon the practice.

At Amgen, for example, four of the six members of the board compensation committee had personal or business connections to Sharer before joining the board. In fact, he nominated at least two of the six to the board, according to a company source and reports.

These kinds of ties — between chief executives and the boards that oversee them — permeate corporate America. On a typical board, the chief executive considers about about 33 percent of the board of directors as “friends” rather than as mere “acquaintances,”according to a survey of chief executives at about 350 S&P 1500 corporations conducted over 15 years by University of Michigan business professor James Westphal.

More tellingly, the chief executive is likely to find even more friends on the compensation committees of corporate boards — almost 50 percent.

In an advisory vote by Amgen shareholders in May, about 56 percent of votes cast approved the company’s executive compensation. Many shareholders, however, are frustrated.

“The members of the Amgen board are basically just rubber-stampers,” said Steve Silverman, who owns one of the largest chunks of Amgen stock held by an individual investor. “Kevin put most of them on the board himself. If he’s getting paid too much — and he certainly is — they’re not going to say so.”

Minimum wage pay, often not linked to performance, either. Many of my employees were being overpaid....( but not for long )

 

[del]

...When a share holder finds out that management has failed then that's the time to STOP trusting. People who work in a free market need to count their change and read their contracts. What needs to continue (or start) here is a sense of personal responsibility for one's actions. It's true in the market, it's true in a marriage, and it's true in the voting booth.

Except that the personal responsibility shouldn't be applied at the executive level...

Ah, a teachable moment here.

We're talking about people having a sense of responsibility for their own actions, as in you can deal with the consequences of your actions if you want, and the adults here will expect to deal with the consequences of their actions. It means don't expect me to clean up after your bad money and voting choices.

if you had another six brains, you'd have a half dozen.

 

[Toro]

...When a share holder finds out that management has failed then that's the time to STOP trusting. People who work in a free market need to count their change and read their contracts. What needs to continue (or start) here is a sense of personal responsibility for one's actions. It's true in the market, it's true in a marriage, and it's true in the voting booth.

Except that the personal responsibility shouldn't be applied at the executive level...

Ah, a teachable moment here.

We're talking about people having a sense of responsibility for their own actions, as in you can deal with the consequences of your actions if you want, and the adults here will expect to deal with the consequences of their actions. It means don't expect me to clean up after your bad money and voting choices.

Ooh, deflection.

In the meantime, we still have lousy corporate governance laws that entrench lousy managements to rip off shareholders. If unions were doing the same thing, I somehow doubt I'd get your same little morality lesson lecture.

 

[alan1]

There is virtually no relationship between relative CEO pay and relative corporate performance. One reason is because CEO's aren't paid based on performance. They are paid relative to how other CEOs are paid.

You do realize this happens with many jobs across the board don't you. XYZ Co. that build widgets checks and keeps their pay scale in line with ABC Corp. that makes widgets too. No one wants to be under or over so they talk to one another about what they pay. Now, what they do to reward performance is use a pay scale within each range where the bottom might be $30 and the top is $35k.

Comment #1 about the part in red above.
That reminds me of the time a vice president was holding a meeting with us managers at a company I worked at years ago. Our company had done a wage survey of the area and industry and determined that we were paying the average wage for the area/industry. He told us that since we paid a fair wage, we should be trying to attract and hire only the top 20% of people in the industry. I spouted off that since we only paid an average wage, all we could attract was an average employee. I explained that the companies that paid the top 20% salary were getting the top tier employees. He got mad as hell at me, but all the other managers agreed with me. He got fired about a year later.


Comment #2 about the part in red above.
A few years ago, the company I currently work for did a wage survey for the area. They realized that they were paying less than the other Fortune 500 companies in our city for the exact same type of work that I do now (I was new to the industry and had only worked in the field for one year). I got a 17% raise that year. This year has been nice also, I got a 10% raise 5 months ago, an additional week of vacation, primary bonus potential raised from 3% to 10%, and a secondary bonus guaranteed minimum of 7% but up to 12.5% (promotion). My annual review and raise is this month, so I'll get another raise in a few weeks.

edited typo

 

[Oddball]

Reload this Page CEO Pay Often Not Linked to Performance

Yeah....And?

During my brief foray into working in the corporate world, almost nobody's pay was based upon performance...In fact, if you performed too well and acted like you gave a shit, you'd usually run afoul of middle management types who had become fat, lazy and complacent in the corporate bureaucracy.

So what else is new?

Aside from you defending that bullshit on a daily basis..while they play with Tax Payer dollars like monopoly money..

Not much?

Who was for and who was against the Wall Street bankster bailouts, comrade hyperboleski?

 

[expat_panama]

...don't expect me to clean up after your bad money and voting choices.

if you had another six brains...

It all boils down to what the conflict is. It's really not better corporate governance that you want, but rather the end of all private corporations.

 

[expat_panama]

...We're talking about people having a sense of responsibility for their own actions, as in you can deal with the consequences of your actions if you want, and the adults here will expect to deal with the consequences of their actions...

Ooh, deflection. In the meantime, we still have lousy corporate governance laws...

People keep flaking from one topic to another like little kids. The topic's supposed to be CEO pay vs performance, which I'd have thought would point to how those of us that are doing the paying can stop if we want. Now you're jumping to corporate laws to fight others with the idea that all is lost and everyone's picking on you. Like little kids with their Marx and Lenin.

 

[CrusaderFrank]

Government work NEVER linked to performance

 

[Toro]

...We're talking about people having a sense of responsibility for their own actions, as in you can deal with the consequences of your actions if you want, and the adults here will expect to deal with the consequences of their actions...

Ooh, deflection. In the meantime, we still have lousy corporate governance laws...

People keep flaking from one topic to another like little kids. The topic's supposed to be CEO pay vs performance, which I'd have thought would point to how those of us that are doing the paying can stop if we want. Now you're jumping to corporate laws to fight others with the idea that all is lost and everyone's picking on you. Like little kids with their Marx and Lenin.

You should stop with the false leftist analogies. It doesn't help your argument.

The best way to ensure corporate pay for performance is to reform the way corporate boards and committees are structured such that shareholders have more influence over their company. This us something I would have thought the Right would wholeheartedly support. However, managements have been able to muddy the waters by arguing that corporate interests are the same as their own interests, which is patently not true. And they are able to do this by using shareholders' funds often against shareholders' own interests. A perfect recent example was the heavy opposition and lobbying by corporate interests against the Proxy Access rule which would have made it easier for shareholders to vote for a different slate of directors opposing managements' slate. There is no reason for this other than to thwart shareholders' interests and entrench management.

It's so surprising that the Right would have any objection to this because it is much more pro-capitalist than the current system. The current system allows employees to bleed shareholders dry with little recourse.

 

[expat_panama]

Government work NEVER linked to performance

It is, and the question goes to 'which gov't work' and 'what performance'.

For hundreds of years our military forces have endured unspeakable sacrifices or our well being. We must honor that sacrifice. Same goes for many of those who've served with federal law enforcement. Our elected leaders include Washington and Lincoln. Great leaders. Bottom line here is we Americans run the show and we're getting what we're asking for. OK, we can improve, but what we got is still better than what others have tried.

That's my point on private leadership too.

 

[Big Fitz]

Government work NEVER linked to performance

From our "ooooo SNAP!" file...

And the left goes alll daffy duck on yo ass....

[ame=http://www.youtube.com/watch?v=Mw9vaNS3b0s&feature=related]Robin Hood's Moves Part 1 - YouTube[/ame]

 

[Skull Pilot]

Union workers' pay isn't linked to performance either.

 

[Big Fitz]

Union workers' pay isn't linked to performance either.

Just seniority and I can vouch it's true cuz I do a much better job than many of my union bretheren and they still make more than me cuz of seniority. Plus, if the public doesn't like em there's no penalty, or they cut corners doing the job, they get up to 16 chances before they're terminated.

Yeah, performance doesn't mean dick to a union because performance bonus pay threatens the whole lot of them.

 

[expat_panama]

...You should stop with the...

Hey guy, this constant switching from CEO pay to me just won't wash. OK, everyone likes to talk about himself and I'll admit I'm no exception, but when I talk about me I even bore myself. We started off with an economics thread and if it's being hijacked into one on personality politics I'll have to sit it out.

Not that there's anything wrong with personality politics, but I'm not very good at it.

 

[Toro]

...You should stop with the...

Hey guy, this constant switching from CEO pay to me just won't wash. OK, everyone likes to talk about himself and I'll admit I'm no exception, but when I talk about me I even bore myself. We started off with an economics thread and if it's being hijacked into one on personality politics I'll have to sit it out.

Not that there's anything wrong with personality politics, but I'm not very good at it.

Well, stick to the topic at hand then rather than trying to make political analogies that support your ideology.