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Ending the cult of the CEO

managementtoday.co.uk

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Re: Ending the cult of the CEO

#141

Post by learc83 »

nnfy wrote: post #106
aaroninsf wrote: post #97

Earlier quoted context omitted.

There is an unvoiced logic here that I question. The contention is that a CEO saves $x million, and thereby 'earns' some [preposterous] fraction thereof, as a finders' fee. This is a similar logic to a broker taking a percentage of a large market transaction. That part I disagree with and think many upset about CEO compensation (or market speculators/industry windfalls) is that this is earning in any meaningful way.…

So management in general doesn't deserve more than $X? CEOs do much more than simply broker deals, and the rest is explained by basic market principles-good CEOs are scarce, and therefore well compensated.

There's much more to it than that. Executive compensation doesn't correlate well to company performance. Companies are historically horrible determining what makes a good CEO.

Other potential explanations for inflated CEO pay (relative to previous decades) include executive compensation boards staffed by executives in similar positions from other companies, and boards that want to keep up appearances by having a highly paid CEO.

Re: Ending the cult of the CEO

#142

Post by erikpukinskis »

ktRolster wrote: post #49
elihu wrote: post #36

The way I look at it, there are two kinds of CEOs. There are the ones that founded the company and have led the company according to their own personal vision. Many of them hold stock worth billions and they're generally looked up to as "captains of industry". The other kind is the CEO who is hired by the board of directors. They're usually very well paid and given a lot of stock, but aren't wealthy the way, say, Bil…

The way I look at it, a good CEO can save a company millions (or even billions if it's a large company like Sony) by negotiating better contracts. That is a skill some CEOs have. Now, if you're going to hire a CEO with that skill, do you think he's not going to also negotiate a good contract for himself? He has that skill.

A good customer support person can save a company millions too. Same for a good engineer or a good sales person.

The purpose of a company should be to support every employee to make those kinds of contributions. If they can only happen at the top it's probably because the employees at the bottom are handcuffed, which totally negates the million dollar contributions the CEO is making.

Re: Ending the cult of the CEO

#143

Post by yuhong »

CountSessine wrote: post #73
JoeCortopassi wrote: post #72

Reasons why CEO's make millions and I don't: - Business Network: If I had a billion dollars, I would never have been able to acquire Instagram. I wouldn't even be able to get a seat at the table. Zuckerberg closed it in record time while talking to a company that wanted to be on it's own - Market Knowledge: I thought the iPad was the stupidest device ever, Steve Jobs didn't. I now have 4 at my house along with two of…

The Marissa Mayer one is the one that really stands out to me. A lot of people seem to think that she was brought in to save Yahoo; no one on the inside was thinking that. Everyone understood that Yahoo was hopeless and they were headed for a sudden collapse. Mayer was brought in to rescue whatever shareholder value she could and as long as shareholders got something back they would be willing to split some of it wit…

Part of the problem is that it took way too long for someone like her to be the CEO.

Re: Ending the cult of the CEO

#145

Post by crdb »

self_assembly wrote: post #138
tertius wrote: post #125

Earlier quoted context omitted.

> I'd start by paying CEOs less. I would say that it's a good thing that you're not king then... And no, the stress of C level jobs does not compare to the mean like you would have it.

I agree that the stress level of C jobs does not compare to the mean. It must be nice not to have to stress about a mortgage, kids college, affordable healthcare and all the other things that ordinary people in western society struggle with. I think a lot of people would trade stressing about their families financial well being with the needs of the shareholders. I'm not saying it is not a tough job but at the end of…

A C-level (at least an honest, non-sociopathic, non-clueless one) will stress about the mortgage, kids college, affordable healthcare and all the other things of his or her thousands of employees, since actions at that level impact all of the above. With great power comes great responsibility...

I've just watched the head of a company I know hire 4 employees out of his own pocket in a shell company to do nothing, after the company where they were all employed went bankrupt. He couldn't afford more than that. He hired them a few months later in his new job. This kind of leadership doesn't make it to Business Insider or Tech Crunch.

Re: Ending the cult of the CEO

#146

Post by throwaway91111 »

elihu wrote: post #36

The way I look at it, there are two kinds of CEOs. There are the ones that founded the company and have led the company according to their own personal vision. Many of them hold stock worth billions and they're generally looked up to as "captains of industry". The other kind is the CEO who is hired by the board of directors. They're usually very well paid and given a lot of stock, but aren't wealthy the way, say, Bil…

It seems the second class is more valuable. Anyone can build a business; making it last is the hard part.

Re: Ending the cult of the CEO

#147

Post by MikeTheGreat »

argv_empty wrote: post #119
MikeTheGreat wrote: post #113

Earlier quoted context omitted.

I'm curious - is it common to hire CEOs and then compensate them with a commission of their negotiated savings? I'm sure that the devil is in the details, but for a company that is already up-and-running it seems like it should be possible to measure how much the company is spending currently, then how much less the company spent after the CEO negotiated, and then give the CEO a fraction of that.

That seems like what stock compensation is aimed at. If the company gets a better deal on something, it retains more of its assets and is thus worth more to its owners.

Yeah, but the stock price is affected by too many factors to make the argument that it's a good proxy for any one thing.

Certainly, the stock value isn't going to rise or fall appreciably for most of the deals that the CEO will negotiate - it would have to be big enough to 'make the news' and/or show up in a press release, at a minimum.

I feel like I've heard the argument that "CEOs negotiate great deals and that helps to justify their compensation" before, but I've never heard of anyone actually basing a compensation schema on that directly. Given that we live an an Era Of Data I'd expect companies to be doing this (or trying to do this).

Re: Ending the cult of the CEO

#148

Post by yeukhon »

CountSessine wrote: post #73
JoeCortopassi wrote: post #72

Reasons why CEO's make millions and I don't: - Business Network: If I had a billion dollars, I would never have been able to acquire Instagram. I wouldn't even be able to get a seat at the table. Zuckerberg closed it in record time while talking to a company that wanted to be on it's own - Market Knowledge: I thought the iPad was the stupidest device ever, Steve Jobs didn't. I now have 4 at my house along with two of…

The Marissa Mayer one is the one that really stands out to me. A lot of people seem to think that she was brought in to save Yahoo; no one on the inside was thinking that. Everyone understood that Yahoo was hopeless and they were headed for a sudden collapse. Mayer was brought in to rescue whatever shareholder value she could and as long as shareholders got something back they would be willing to split some of it wit…

Interesting. But I think she might have a different agenda wven if she did have such verbal mutual understanding with the board. For someone like her becoming CEO becoming a savior is important. She probably eventually pushed her technical agenda wanted to save the company and make profits so she can stay there long.

Re: Ending the cult of the CEO

#149

Post by cbsmith »

yuhong wrote: post #143
CountSessine wrote: post #73

Earlier quoted context omitted.

The Marissa Mayer one is the one that really stands out to me. A lot of people seem to think that she was brought in to save Yahoo; no one on the inside was thinking that. Everyone understood that Yahoo was hopeless and they were headed for a sudden collapse. Mayer was brought in to rescue whatever shareholder value she could and as long as shareholders got something back they would be willing to split some of it wit…

Part of the problem is that it took way too long for someone like her to be the CEO.

Shareholder value went up very quickly after she came on board.

Re: Ending the cult of the CEO

#150

Post by idoh »

crdb wrote: post #110
idoh wrote: post #48

Earlier quoted context omitted.

Sometimes non-founder CEOs are worth it and can completely turn around the fortunes of a company. For example, Eisner for Disney, Kroc for McDonald's, Welch for GE, Jobs (the second time around), and either Ballmer or Nadela (depending on which one you pick). So I don't think the founder / non-founder distinction holds up.

I'll give you Eisner, but Kroc's first franchise was the 9th McDonald's overall and he is the sole reason for its international dominance, so he's not a founder only in the technical definition of founder. Technically, Warren Buffett is not the founder of Berkshire Hathaway, the old textile business. As for Welch, GE Capital was a good chunk of GE's revenue and profits... right up to 2008 [1] where it might have sunk…

Fair points, did not know that about Welch. I stopped following GE in 2002.
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