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Ending the cult of the CEO

managementtoday.co.uk

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Re: Ending the cult of the CEO

#151

Post by crush-n-spread »

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…

You don't know what you're talking about. CEOs have mortgages, healthcare, and families to worry about. They also have a handful of very demanding, very intimidating investors to please, to each of whom they owe millions, they have employees that are constantly getting poached, they have users that are shitting on their product online.

At large, people are terrible. CEOs are working with these terrible, dumb, rude, and sometimes harmful people to get them to invest, to work, to be productive, to just help get a product out the door. And if they don't get products out the door - If companies do not succeed - You can say goodbye to your nation. We are built on the fruits of technology-selling companies through and through; our wealthy nations do not come from nowhere, someone has to do the work, and CEOs are all doing the work in addition to family, healthcare, and mortgage woes.

Re: Ending the cult of the CEO

#152

Post by michaelmrose »

tertius wrote: post #122
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.…

I would make the contention that it is up to the company and the board of the company to decide the compensation of any of it's employees, including the CEOs. "Luck" has a lot to do with it, but it also has a lot to do with many other types of success that most people don't have problems with.

"I would make the contention that it is up to the company and the board of the company to decide the compensation of any of it's employees, including the CEOs."

Is it any shock that a class of people value people in their own set over the people that actually do the work?

Re: Ending the cult of the CEO

#153

Post by lmm »

MikeTheGreat wrote: post #147
argv_empty wrote: post #119

Earlier quoted context omitted.

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 hel…

The stock price is what the investors value; they want the CEO to increase it by whatever means. Any other incentive structure would presumably lead the stock price to fall, or rise less, which wouldn't be what they want.

Re: Ending the cult of the CEO

#154

Post by crdoconnor »

abtinf wrote: post #60
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 caricature of investors as "the wealthy" is not connected to reality. If you are interested in having a retirement, you have a stake in the game - even if your entire plan is to rely on social security, someone has to make the money that will be taken and given to you. If you have an interest in a high standard of living or low cost of living, efficient investment decisions are vital to you. When you hire someone…

"The caricature of investors as "the wealthy" is not connected to reality."

Because you think the wealthiest top 5% owning 82% of all stocks isn't an accurate statistic? Or because you think the top 5% are not what you'd consider "wealthy"?

Re: Ending the cult of the CEO

#155

Post by mmjaa »

crdoconnor wrote: post #154
abtinf wrote: post #60

Earlier quoted context omitted.

The caricature of investors as "the wealthy" is not connected to reality. If you are interested in having a retirement, you have a stake in the game - even if your entire plan is to rely on social security, someone has to make the money that will be taken and given to you. If you have an interest in a high standard of living or low cost of living, efficient investment decisions are vital to you. When you hire someone…

"The caricature of investors as "the wealthy" is not connected to reality." Because you think the wealthiest top 5% owning 82% of all stocks isn't an accurate statistic? Or because you think the top 5% are not what you'd consider "wealthy"?

More than likely, its because they've got skin in the "keep CEO's great" game, and want to obfuscate the issue being discussed before it devolves into "coz Marxism sucks" ..

Re: Ending the cult of the CEO

#156

Post by throwaway_374 »

crush-n-spread wrote: post #151
self_assembly wrote: post #138

Earlier quoted context omitted.

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…

You don't know what you're talking about. CEOs have mortgages, healthcare, and families to worry about. They also have a handful of very demanding, very intimidating investors to please, to each of whom they owe millions, they have employees that are constantly getting poached, they have users that are shitting on their product online. At large, people are terrible. CEOs are working with these terrible, dumb, rude, a…

I was about to fly off the handle until I realised your sarcasm.

Re: Ending the cult of the CEO

#157

Post by TheOtherHobbes »

learc83 wrote: post #141
nnfy wrote: post #106

Earlier quoted context omitted.

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 high…

I think the latter is the real reason for insane comps. The logic seems to be:

Rich CEO = successful company = investor opportunity

No one cares about the shlubs doing the actual work.

Indeed, a lot of the time no one cares about the actual work, or the long-term prospects of success.

Re: Ending the cult of the CEO

#158

Post by jernfrost »

Good this topic gets brought up. I've blogged about this in the past: http://blog.translusion.com/posts/CEO%20Salaries/

Studies by Gabaix and Lanier, who were in favor of performance based pay showed that the difference between the best CEO and the 250th best was 0.016 percent.

Meaning if one replaced the 250th best CEO with the best, then the companies market capitalization would grow by 0.016 percent.

Perhaps what really matters is how bad the CEO is not how good he/she is. E.g. it is like studies of parenting, there is no difference in outcome for kids with awesome parents and those with average middle-class parents. The big difference is between bad parents and average parents.

Something similar with IQ. There is no difference between having 130 in IQ and having 200, with respect to your chances of winning the nobel prize. But there is a noticable difference between having say 100 and 130.

Re: Ending the cult of the CEO

#159

Post by jernfrost »

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.

CEOs don't generally get a high salary because their amazing negotiation skills. It is far more mundane than that. Also you perpetuate simply a myth about how amazing a CEO is for a company. He/she simple isn't. See: http://blog.translusion.com/posts/CEO%20Salaries/

Re: Ending the cult of the CEO

#160

Post by TheOtherHobbes »

idoh wrote: post #96
rdgthree wrote: post #91

Earlier quoted context omitted.

Ballmer ruined the company, not turned it around. He took something amazing and tanked it. Nadella is the example here.

That's kinda the point I was getting at - some people would pick Ballmer as being a great CEO, others would pick Nadella.

And some people would say they're both wrong.

Ballmer gets credited with XBox etc, but I always thought MS was doing a lot of spray-and-pray management during the Ballmer years, and there were far more failures than successes. There certainly didn't seem to be any realistic strategy or vision. (I remember going to a trade fair with a huuuge MS stand showing off some kind of library or book management service. That product was dead less than a month later.)

Nadella seems to like strategy so much he has a handful running all at the same time. Which is how you get something like "Cloud-first, mobile-first" - which doesn't even make sense.

Point being that CEOs are there to signify the existence of leadership[tm], not necessarily to provide it - and markets and investors don't appear to be able to tell the difference.

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