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Worst Tech CEOs Earn the Most Money 313

Posted by ScuttleMonkey from the strive-to-be-an-underachiever dept.
tappytibbins writes to tell us Baseline is reporting that in a recent look at the 100 largest tech companies they found that there was a striking correlation between the highest paid CEOs and the lowest returns. From the article: "The one-third highest performing companies paid their chief executives an average of $7.12 million--while the bottom third paid their CEOs $9.29 million. The study compared direct compensation, which includes base salary, bonus and value of stock grants. Why the disconnect? Jack Dolmat-Connell, founder and president of the firm, cites the phenomenon of 'chasing the median': Companies benchmark their executive compensation figures on peers instead of looking at factors related to performance."
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Worst Tech CEOs Earn the Most Money More

Worst Tech CEOs Earn the Most Money

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  • In pursuit of excellence? (Score:5, Interesting)

    by ackthpt ( 218170 ) * on Tuesday July 18, 2006 @07:38PM (#15740369) Homepage Journal

    Why the disconnect? Jack Dolmat-Connell, founder and president of the firm, cites the phenomenon of 'chasing the median': Companies benchmark their executive compensation figures on peers instead of looking at factors related to performance.

    How about the former CIO where I worked? You could swear his primary motivation was to get himself more money, however he did it, by making his performance look good, the long-term problem is determining if that appearance of 'good performance' really was as good as it looked on paper and how it enabled the business the grow or trim costs effectively.

    "If I make all those guys putting in 16 hour days wear suits and ties, we'll look more professional and I'll get compliments on what a tight ship I run! That should get me $100,000 more per year."

    • We had a guy who took a job, changed the numbers on a report to show his predecessor sucked, and then faked his numbers to look good.

      Since none of the management ever checked the chart, they didn't realize the real numbers were lower than the last guy. Since they didn't check the numbers, they gave him a huge raise.

      Nice.

      • Re:Modify the numbers (Score:2, Interesting)

        by ackthpt ( 218170 ) *

        We had a guy who took a job, changed the numbers on a report to show his predecessor sucked, and then faked his numbers to look good.

        Yeah, Lies, damn lies and statistics. Without oversight it's amazing what you can make metrics say. Don't like what one measure says? Come up with one that does!

        "Hmm. The department costs too much in overtime, but we can't cut it or work won't get done and people will notice more problems since I took over. I know I'll show how much in Fringe Benefits we are saving b

      • "nice" (Score:2, Funny)

        by mnemonic_ ( 164550 )
        Yeah, it was nice. Anyways I jumped ship a year later; I got a new offer with even better pay. I love money.

      • Re:Modify the numbers (Score:5, Insightful)

        by cluckshot ( 658931 ) on Wednesday July 19, 2006 @07:53AM (#15742346)

        Stock Holders!!!!! Listen up you should try being a capitalist insted of watching all the silly nonsense. Capitalism means you get paid. Check out those dividend checks. If they are not there you probably bought a pig in a poke. Quit paying attention to annual report con games and start looking at the most basic axiom of capitalist reality. Capital gets paid!

        A few convenient signs that capitalists should look for. If a company is outsourcing its product, the management has decided for reasons that may or may not be obvious to investors, that the company is obsolete and is no longer functional. You are going out of business and dividends will not be coming your way any time soon. If your CEO has given himself a raise and fired your employees you know this is a fact.

        Another sign is pretty simple. Check the turns of your busines. Walmart for example and it is one of the better US examples, it turns its inventory about 90 to 100 times a year. That is for a retailer very fantastic. They have conned the towns into building their stores under Industrial Development Bonds so they don't even own the stores. Their inventory is largely consignment or on 60 day payment terms. This means they are turning an inventory with at least 5% per turn net income 90 times a year (Net income per year is now 90 Times 5 = 450% per year on gross value) Since they don't even own the gross value the calculation fails to go high enough. It means in plain terms they should be paying dividends well in excess of 500% a year. If you were a capitalist, you would wake up to this and demand your check or fire the CEO. Failure to demand your dividend check is to see the CEO steal your income as his paycheck.

        For those idiots in the moderation group who don't see that this is capitalism, I suggest you get a dictionary and forget your mod points. It is time for capitalism to return and Faschism to go away.

        • Re:Modify the numbers (Score:3, Insightful)

          by jsfetzik ( 40515 )
          See there's the problem. No one cares about dividends any more. They only care about the price going up so they can sell it. Most stock isn't held long enough for most people to even see a dividend, if they ever even give one. ;-)
    • That's the problem with pay-for-performance - it invites abuse. Whatever arbitrary benchmarks you set for the CEO/CIO/everyday employee, there will be the temptation to work to the benchmarks and ignore the longterm best interests of the company. Taken to it's extreme, you get an Enron or WorldCom, where executives spent most of their time making the books reflect performance that would enhance their stock options.

      • Re:Problem with pay-for-performance (Score:5, Insightful)

        by iocat ( 572367 ) on Tuesday July 18, 2006 @08:42PM (#15740646) Homepage Journal
        The other thing to consider is that the CEOs at the poorly performing companies knew the companies sucked, and only took the jobs for big bucks. I've been recruited to an inferior company, and offered more money, because they knew they had to pay more than the superior company I was at. This happens all the time, as inferior companies try to buy their way out of inferiority.

      • Whatever arbitrary benchmarks you set for the CEO/CIO/everyday employee, there will be the temptation to work to the benchmarks and ignore the longterm best interests of the company.

        Good point - and I've got the obvious example. Some years back I did a few months work at a steel mill which measured performance in tonnes of steel per employee. The manager did the obvious dirty trick and employed contractors at a higher rate so there would be less company employees on site and the numbers would look better.

      • I think there's business anti-pattern here that convers performance bonus abuse and overpaid CEOs.

        I'd call it "Money is the solution to everything -- including cluelessness."

        We all know politicians do this, but it's common enough in business too.

        Supposing you're on the board of a company. You don't really understand what the company does or needs to do. You don't understand the business well enough to know whether that bright, affordable, but rather dull candidate knows what he's talking about. But Mr. S

    • A big misunderstanding of why CEOs get paid (Score:5, Insightful)

      by EmbeddedJanitor ( 597831 ) on Tuesday July 18, 2006 @08:37PM (#15740630)
      When CEOs negotiate their pay, they typically do this taking a whole-career stance. If a CEO gets hired by a high risk company, then he risks giving himself a bad name. Thus, a company in bad shape (that has a high risk of tainting the CEOs name) will have to pay more to attract a CEO.

      Performance has little to do with it.

      • I don't think the story is wrong, neither do I think you are wrong. When the company is tanking, the board says "We need a superstar CEO, let's start throwing money around!" When the company is doing well, the board says "the CEO deserves a massive reward!" Or, if the company tanks with the new CEO, the board says, "We need to fire this CEO! Too bad we signed on to that multi-million-dollar golden parachute. Oh well, it was the right decision at the time. Let's get a bold, expensive new CEO who has th
    • 18 months on average. Gotta grab all you can while you can, I guess.

    • Hire me! I can save you $5,000,000 (Score:5, Interesting)

      by Ogemaniac ( 841129 ) on Tuesday July 18, 2006 @10:41PM (#15741047)
      Figuring that leaves me with $3 million to work with...that should get me two university professors, two hot-shot MBA grads, two accountants, two lawyers, two scientists/engineers in the relevant business, a doctor just for balance, four secretaries - and a cool half million for me.

      I am sure that together we can make just as good of decisions as your precious CEO.

      Actually, I think the problem here is the Lake Wobegon Effect - no company is will to admit that it would dare hire a below average CEO. Therefore, of course theirs deserves pay greater than the average...
  • Their CEOs made a lot of money while their companies went down the drain.

  • Or... (Score:5, Insightful)

    by cgenman ( 325138 ) on Tuesday July 18, 2006 @07:41PM (#15740386) Homepage
    It could be that those companies that are run by those who undervalue their workers and and mismanage the companies towards the top are doomed to failure.

    Or those companies whose management is there for love of the business tend to do better.

    Or a company desperately in need of help is likely to dump huge sums of money on acquiring the most expensive CEO they can, in the hope of a turnaround.

    • Re:Or... (Score:5, Insightful)

      by telbij ( 465356 ) on Tuesday July 18, 2006 @07:45PM (#15740400)
      Or a company desperately in need of help is likely to dump huge sums of money on acquiring the most expensive CEO they can, in the hope of a turnaround.

      This would be my first guess. Companies dumping money on CEOs may work in businesses where CEOs are rock stars, but in the tech industry it makes sense that a CEO would not be of much help if they don't have a solid technological base. It's not like other industries where good CEO-sense can take you a long way. If a tech CEO doesn't have people underneath that can tell him what the problem is, he isn't likely going to be able to figure it out intuitively.

      • Re:Or... (Score:4, Interesting)

        by StevenMaurer ( 115071 ) on Tuesday July 18, 2006 @07:58PM (#15740467) Homepage
        It's not like other industries where good CEO-sense can take you a long way.

        Aside from corruption from having special friends in the government, there is little evidence that good "CEO-sense" (whatever that means) has much to do with success. In fact, the only way we have of evaluating good "CEO-sense" is by looking backwards, which makes every CEO lucky enough to inherit a good market position "good" by tautology.

        But as a predictor, as they always say in the buz, "past performance is not a guide to future performance".

      • Re:Or... (Score:3, Insightful)

        by Nefarious Wheel ( 628136 )
        but in the tech industry it makes sense that a CEO would not be of much help if they don't have a solid technological base. It's not like other industries where good CEO-sense can take you a long way...

        True. Remember Carly?

    • Re:Or... (Score:5, Interesting)

      by Anonymous Coward on Tuesday July 18, 2006 @07:53PM (#15740440)
      A poorly performing company with little future will only be able to hire and retain top management by throwing money at them. No savvy CxO wants a sunk ship on his resume.

      My S.O. _is_ an executive recruiter, and I know this happens.

      • Re:Or... (Score:5, Insightful)

        by sootman ( 158191 ) on Tuesday July 18, 2006 @10:33PM (#15741028) Homepage Journal
        No savvy CxO wants a sunk ship on his resume.

        Of course, I'll go to my grave not understanding why someone who makes more in a year than my whole family will see in my lifetime gives a shit about his resume. Isn't there such thing as "enough"? Give me a $7M golden parachute and I'll spend the rest of my days snorting coke out of supermodels' cleavage on my private island, wiping my ass with however many copies of my resume I still have around.

        Seriously, it's disgusting that someone who's basically holding the wheel of a sinking ship gets paid that much. I'm pretty sure I could drive the final nails into a dying company's coffin with the skills and training I have now. I could also plow a stock car into Turn 1 at Daytona. Where's my seven mil?

        • Re:Or... (Score:4, Insightful)

          by dr_dank ( 472072 ) on Wednesday July 19, 2006 @12:57AM (#15741364) Homepage Journal
          These types of CEOs aren't the kind that work their way up from mailroom to boardroom. All too often, they're born into circles of power and privilege that give them access to these kinds of positions. They could give a damn about resumes, its all quid pro quo; the few make the cash grab at the expense of the many.

          Hell, some of them repeatedly run ventures into bankruptcy and are still able to secure financing for their next abomination. Donald Trump comes to mind in this regard.

        • Re: (Score:3, Funny)

          by account_deleted ( 4530225 )
          Comment removed based on user account deletion

        • Re:Or... (Score:3, Informative)

          by Tom ( 822 )
          You greatly overestimate the value of money. $7m, for starters, will not elevate you much beyond your current life style.

          If you invest it with a 10% return, and taxes only take a third of that, you'll make less than half a million a year. Certainly enough for comfortable living, definitely enough for a bigger house and a second car and not having to work anymore. Definitely not enough for supermodels, coke, yachts or private islands.

      • Re:Or... (Score:3, Insightful)

        by canuck57 ( 662392 )

        A poorly performing company with little future will only be able to hire and retain top management by throwing money at them. No savvy CxO wants a sunk ship on his resume.

        So why not go into the trenches and grab someone normal who has company spirit, a good track record in business results and not gamble on a professional self centered CEO that is so full of BS. People near the bottom are used to getting results and not having to BS it up. If you grabbed a senior underpaid tech that invests in the stock

    • Re:Or... (Score:5, Interesting)

      by mdfst13 ( 664665 ) on Wednesday July 19, 2006 @02:01AM (#15741485)
      I think that the issue is tainted data. First, they take the top hundred tech companies. Then, they divide them into those that did well and those that did not. As a result, when they hired the CEO, those that did not do well were, on average, bigger than those that did do well. Why? Because if a company was at the bottom of the top 100 and did not do well, they fell off. The companies that are still there were bigger than the average tech company last year. Companies that did do well were smaller last year.

      I think that the "study" basically says that bigger companies pay their CEOs more, which is not exactly insightful. IBM pays their CEO more than Adobe's? Really?

      To get real data, they should have taken the top hundred companies from *last* year and seen how they did this year. They also might want to consider doing something like dividing CEO salary by last year's revenues. That would better control for the differences in size between companies like IBM and Adobe.

      IBM: $12 million salary out of $96 billion revenue = 1/8000

      Adobe: $1.9 million salary out of $1.9 billion revenue = 1/1000

      Note: revenue numbers may not be from last year; too lazy to find details in google links.

      It looks like Chizen is actually paid better per dollar of revenue than Palmisano is.

  • P2P Compensation. (Score:2, Interesting)

    by Anonymous Coward
    "Companies benchmark their executive compensation figures on peers instead of looking at factors related to performance."

    Isn't that how most pay is determined? By what others are paid in your profession/industry?

  • this is not completely new (Score:5, Interesting)

    by uujjj ( 752925 ) on Tuesday July 18, 2006 @07:43PM (#15740397)
    I remember a business book from the 90s, "Built to Last", that also noted that companies with higher paid executives performed worse.

    • Re:this is not completely new (Score:5, Informative)

      by ThinkWeak ( 958195 ) on Tuesday July 18, 2006 @07:59PM (#15740476)
      That book was by Jim Collins. His point was not that companies with higher paid executives performed worse, it was that in taking a cross-section of successful companies - those with higher paid CEO's didn't necessarily become more successful.

      He has written a follow-up book titled "From Good to Great" which does another analysis concerning what it takes for a company to really elevate itself above its competitors. This book was written as a prequel to "Built to Last". It also highlights the same ideals, in that money is not necessarily THE PRIMARY motivator in a company that can become very successful. Successful being that its stock price displays gains of more than 3.2 points above the market consistantly across 15 years.

  • correlation vs. causality (Score:4, Insightful)

    by fredmosby ( 545378 ) on Tuesday July 18, 2006 @07:51PM (#15740426)
    Maybe the companies that are in a bad position are willing to pay more to get a good CEO. But just hiring a 'good' CEO won't put the company in a good position.

  • not a conclusive study (Score:3, Insightful)

    by Anonymous Coward on Tuesday July 18, 2006 @07:51PM (#15740429)
    Or perhaps the companies doing poorly have only recently hired the "better" CEOs who command higher salaries to help dig them out of the hole.

    I'd like to see executive compensation tracked across executives (not companies!) over time in a fixed-effects regression. Then we would know conclusively whether CEOs were being rewarded for poor performance or not, and it would be as easy to do as the cited study.

  • My tech company.. (Score:5, Funny)

    by Anonymous Coward on Tuesday July 18, 2006 @07:52PM (#15740434)
    My Tech company isn't making anything. $0 returns. I think that means I should be getting paid WAAAAY more than all these guys. I wonder who I talk to about that..

  • Comment removed (Score:5, Insightful)

    by account_deleted ( 4530225 ) on Tuesday July 18, 2006 @07:55PM (#15740454)
    Comment removed based on user account deletion

    • um, what risk? (Score:3, Insightful)

      by rsilvergun ( 571051 )
      these guys saleries and buyout packages mean they'll never have to work again. They're not taking any real risks. When it comes right down to it, they're the ruling class. Succeed or fail, it doesn't matter to them, they'll aways be ok.
      • But when they lose their job, they lose most of their power and influence. All future power and influence will be derived from their own money, a pittance compared to that of the corporation. And that's just the money. Power derived from business relationships is also reduced as many so called "friends" would rather pal around with the CEO of the Fortune 500 corp than some guy who got fired with a severance package, no matter how large.

        • Re:um, what risk? (Score:5, Insightful)

          by MadAhab ( 40080 ) <slasher@@@ahab...com> on Tuesday July 18, 2006 @09:29PM (#15740822) Homepage Journal
          Boo fucking hoo.

          Suppose Kenneth Lay faked his death - even with the money they lawyers will squeeze back from his estate, he'll never have to work again and can live rather well anyplace on earth, because he almost assuredly has some packed away somewhere safe.

          Meanwhile, the thousands of people he screwed out of jobs and pensions plans while playing funny money games may have to take jobs at Walmart to keep from eating cat food in their "retirement" - or, if Social Security is privatized, becoming homeless due to yet more Ken Lays robbing the private funds set up in its place.

          A lawyer I know who has represented white collar criminals confirms that many of them truly think "if I do five years in jail and come out set for life, good for me." Meanwhile, minor pot dealers fill our prisons for a "crime" that hurts no one.

          Excuse me for thinking it's time to bring back the guillotine and right the scales of justice.

          • Re:um, what risk? (Score:3, Insightful)

            by siriuskase ( 679431 )
            I have no pity for Lay. Especially since he seems to have cheated his victims out of restitution. He has lost something worse than his money or his life. He has lost his honor. If he ever shows his face in public and is discovered to be Ken Lay, well, he just can't ever be Ken Lay again without tragic consequences.

            If he is on a beach somewhere enjoying his money, I do hope his conscience won't let him. Unfortunately, I doubt he has one. Jails are for people like that. Or public floggings when he is f

      • Re:um, what risk? (Score:4, Insightful)

        by ranton ( 36917 ) on Tuesday July 18, 2006 @09:10PM (#15740764)
        these guys saleries and buyout packages mean they'll never have to work again. They're not taking any real risks. When it comes right down to it, they're the ruling class. Succeed or fail, it doesn't matter to them, they'll aways be ok.


        Just because they are rich doesnt mean that they dont take risks. If they have moved up to a point where they are able to take such a job (whether it is from their own merits or their family/friends), then they probably live a much richer lifestyle than your average American. To them, making $200,000 a year would not be very much money. That may seam strange to most people, but that is the world they live in. If they take a job at a company that could fail, they could be hurting their future earnings by millions of dollars.

        Use the USA as an example. We have a GNP of about $12 trillion. If the President and Congress made decisions over 4 years that dropped the GNP to $4 trillion, that would be a disaster for the American public. No one would say that our government does not take risks with our population. But even if this happened, our GNP per capita would still be more than 70% of the other countries in this world.

        People on slashdot would be complaining if President Bush screwed up and cut our GNP in half. But by your logic they would have nothing to compain about, because we would still be a very wealthy country.

        Just because someone is more rich than you are doesnt mean that they do not take risks.

        --

    • Anti-business bias (Score:5, Interesting)

      by IntelliTubbie ( 29947 ) on Tuesday July 18, 2006 @09:40PM (#15740861)
      You're absolutely correct that the article summary is somewhat statistically (and economically) illiterate. Instead of "Worst Tech CEOs Earn the Most Money," why not "Struggling Companies Pay CEOs Top Dollar to Turn Things Around"?

      So there are a couple of valid interpretations of this data, and the article (wisely, probably) makes no attempt to jump from correltation to causation. Too bad so many people -- even slashdotters -- have such a hard time resisting the instinct to see the two as being the same.

      Unfortunately, I don't think this is a coincidence. There's no way Slashdotters would have so grossly misinterpreted a study correlating, say, video games and violence -- because the party line around here is that video games are a Good Thing. A lot of geeks, however, have complete disdain for the "suits" and "pointy haired bosses" in management. "Why do the 'clueless' managers make so much money, when I'm obviously so much smarter? Why do I have less job security when I'm the one working 100 hour weeks, fueled by Mountain Dew and fear of downsizing?" It's true that there are bad managers out there, but much of this attitude is just scapegoating for one's own job dissatisfaction ... like people who complain that "The Man" is keeping them down.

      It also shows a profound misunderstanding of business. To the disgruntled coder, it may seem like the business world is stupid and arbitrary -- where people make more money the "dumber" they are -- because they don't understand it. But really, it's little different than if the CEO said: "I don't understand your C++ code; it just looks like a bunch of random characters you threw together. Therefore, it's stupid." Like it or not, there is such a thing as skill in business -- and oftentimes, it's rarer and less replaceable than technical skill. Just take a look at the career of Steve Wozniak, with and without Steve Jobs. Now look at the career of Steve Jobs, with and without Steve Wozniak.

      Cheers,
      IT
      • "Why do the 'clueless' managers make so much money, when I'm obviously so much smarter? Why do I have less job security when I'm the one working 100 hour weeks, fueled by Mountain Dew and fear of downsizing?"

        These are legitimate questions, and you sneer at the people asking them without providing any real answer.

        But really, it's little different than if the CEO said: "I don't understand your C++ code; it just looks like a bunch of random characters you threw together. Therefore, it's stupid."

        Whether the per
  • HP.

    I wonder where Carly was on that list.

  • Best CEOs Earn the Least Money (Score:5, Interesting)

    by jdbartlett ( 941012 ) on Tuesday July 18, 2006 @08:05PM (#15740511)
    If correlation==cause, does that mean Steve Jobs (current salary: $1) would head a list of the world's best CEOs?
    • It would seem to support the theory. Whether you love or hate Apple, it is not hard to make a case for Steve being one of the best tech executives in history. Clearly the nominal salary is a statement that he is already stupidly wealthy but he must get something out of being a top exec, otherwise, why keep at it? Generally, people who enjoy their job perform far better than those that just work to pay the bills (or buy another fighter jet). I always get the feeling that Jobs truely enjoys what he does. I th

    • Re:Best CEOs Earn the Least Money (Score:5, Interesting)

      by gordo3000 ( 785698 ) on Tuesday July 18, 2006 @08:54PM (#15740690)
      not to bash jobs, I think he is great, but he gets compensated better htan most CEO's out there. Massive stock grants, multi million dollar planes, and loads of other "gifts" from the board to show their appreciation. I'm sure if the board completely stopped doing this as well, Jobs might reconsider accepting 1$ in contractual pay.

      and let me clarify, it doesn't require greed to want to get compensated for your money, time, and the value you add. He led apple through an amazing turn around and was at the helm during 4 major occurances: the Ipod, switch to Unix OS, Intel Chips, and streamlining of computer production. But I'd bet he feels he has well earned those gifts just as much as he would probably ask for a very hefty salary for his incredible performance.

  • Celebrity executives are not the best executives (Score:3, Interesting)

    by mcguyver ( 589810 ) on Tuesday July 18, 2006 @08:05PM (#15740514) Homepage
    This applies to CEOs, CIOs, etc. An impressive resume, huge compensation package and celebrity status does not mean you will be a great executive. Sunbeam, Tyco, Enron, WorldCom, etc have all fallen victim to this. Many companies these days are falling into the rock star CEO trap, or CIO in this case, and that's doesn't guarantee success. Read the book Good to Great - Jim Collins analyzes this myth about celebrity CEOs, compensation and returns.
    • In defense of Enron, before the debacle of the late 90's, they were a rock solid company. They pioneered new strategies in the energy market. I think Ken Lay was really a genius. similarly, I've heard Hitler might be the greatest orator of the last century. Being good at something != being moral.

      Granted, I've never heard much about the genius of the management team at the other companies. But I do step to the defense of Enron when it was a legitimate business. And oddly enough, Ken Lay supposedly had

  • There's a Problem Here (Score:5, Insightful)

    by ichin4 ( 878990 ) on Tuesday July 18, 2006 @08:07PM (#15740518)

    There is a problem with this study: it measures shareholder return as a percentage, but compensation as a dollar value. If a CEO grows a $10B company by 1%, he generates $100M for shareholders. If a CEO grows a $100M company by 10%, he generates only $10M for shareholders. The study implies that the second CEO deserves to be paid more, because his company had a larger percentage return. But one could certainly make a good argument that the first CEO deserves to be paid more, because he generated a larger absolute return to shareholders.

    In fact, given the general trend that smaller companies tend to grow faster than large onces, you would expect the data to look like this even if there is no intrinsic correlation between CEO pay and corporate performance.

    I don't write this because I believe that the market for CEO pay works. I write this only because this particular study doesn't prove that the market for CEO pay doesn't work.

    • In fact, given the general trend that smaller companies tend to grow faster than large onces, you would expect the data to look like this even if there is no intrinsic correlation between CEO pay and corporate performance.

      I think that's a big part of it, and doing the analysis in a boom year like 2005 compounds your point.

    • As an inventor you care about your percentage return, not your absolute return. Here's a little test to see for yourself, suppose you have $10,000. Now you have two options:

      1) All $10,000 in one bank account that pays $100 interest at the end of the year.
      2) Put $100 into 100 bank accounts that each pay $50 interest at the end of each year.

      Although the absolute return of option 1 looks superior I think you'd still choose option 2.

      Rational inventors want relative return, not absolute return.

      • Although the absolute return of option 1 looks superior I think you'd still choose option 2.

        Actually, option 2 looks nice - $5000 is pretty good. The problem is that 90 of those accounts will disappear at the end of the year, but one will grow to $20,000 (if you pick wisely).

      • Re:There's a Problem Here (Score:4, Insightful)

        by ichin4 ( 878990 ) on Tuesday July 18, 2006 @10:55PM (#15741089)

        All you are saying is that it is better to get a 10% return than a 1% return on your money, and I certainly don't disagree with that. But you will notice that your example has absolutely nothing to do with the CEO pay. You would want the invesment that returns 10% no matter what the CEO was paid, wouldn't you?

        So let's introduce CEO pay into the equation. If you invest $10K an earn $100, a 1% return, you probably wouldn't be too happy, but you would accept that the person managing that money deserved something for his trouble, so perhaps you're willing to pay him $5. If you invest $10K and earn $1K, a 10% return, you're probably much happier; let's say you're willing to pay the person managing that investiment $50. If guy that returns 1% manages a $10B pool of $10K investments and each one pays him the same $5 fee, he earns $5M. If the guy that returned 10% was managing a $100M pool of $10K investiments and each one payed him $50, he only earns $500K. Notice that everyone here pays and gets payed in proportion to what he produces, but the guy who earned a lower percentage returns still earned more, because he managed more money. See how that works?

  • Count me in! (Score:4, Funny)

    by lionheart1327 ( 841404 ) on Tuesday July 18, 2006 @08:10PM (#15740531)
    Hell yeah.

    Where can I sign up to be a CEO?

    I'll be the worst CEO you can imagine.

  • CEOs of companies whose stock price is rising are happy with their stock options, and don't care whether their salary is $1 or $1000000. Of those, the smart ones opt for the low salary because it's good for employee and shareholder morale.

  • Three things to consider (Score:3, Informative)

    by WillAffleckUW ( 858324 ) on Tuesday July 18, 2006 @08:16PM (#15740554) Homepage Journal
    1. It's not just tech - the overpayment of CEOs has no correlation (or negative if any) with performance at most US firms.

    2. The major problem is that shareowners - that is to say, the capitalists - are even less able to correct excesses of tech firms, as more shares of such firms have been looted - um, pardon me, given as stock options - to the senior execs and CEO/CFO/COO and thus have even fewer checks on such overpaid employees.

    3. Many people fail to understand that most US firms do not permit shareowners to: .a. vote not to overpay senior execs (the only vote is whether or not the amount in cash for strict salary over $1 million is TAX DEDUCTIBLE for the firm, the shareowners don't get to vote down the paypacket, under our form of red capitalism in the USA); .b. vote out board members - most board members need only receive one (1) vote to be reelected - and most have a few thousand shares they were given free or at reduced rate as options and thus there is no check on them; .c. identify the votes of board members on compensation committees so that the shareowners can vote out the actual compensation committee members who rewarded incompetence with even larger pay packets - in most cases the committee decision is reported as if it were unanimous, even if it isn't. additionally, the CEO usually picks the members of the committee and the board in the first place - shareowners don't get to do that.

  • CEOs (Score:4, Interesting)

    by exp(pi*sqrt(163)) ( 613870 ) on Tuesday July 18, 2006 @08:28PM (#15740596) Journal
    The CEO of my old company gambled (and lost) our salaries at Vegas and on stocks and when he decided his salary wasn't enough he created a money funnel^H^H^H^H^Hconsulting company of which he was one of two employees and charged our company for consulting alongside his salary. When all this was uncovered he simply skipped town. He seems to have done this all his life. When he was caught running a mutual fund scam a few years back he got a little slap on the wrist and was banned from trading on certain markets. And he was the nice guy compared to the sleazebag who took over from him (especially when he was buying the drinks). These people just jump from job to job wearing teflon coated suits to which nothing sticks.
    • Here's one for you. Company X makes some pretty cool products in the embedded market. Business is booming. Sure enough, they decide it's time to target the US market - it's the biggest, after all! The CEO sets up a company in the US, and announces that this company - his own, private company - is the 'exclusive distributor' in the US and that all purchasing in that market has to go through him in his role as that company. He jacks up the retail price of the product, because he's the exclusive distributor. C

      • Re:CEOs (Score:5, Interesting)

        by exp(pi*sqrt(163)) ( 613870 ) on Tuesday July 18, 2006 @09:09PM (#15740756) Journal
        So let me tell you about the next CEO at that company. From the day he arrived people were saying "is he deliberately trying to sink this company or what?"

        Anyway, a few months later we hear news from Bangkok (of all places) of a stock scam. Guys in a "boiler room" had been selling a bunch of stocks in various companies. They would deliberately pick companies that were heading for bankruptcy (or could be pushed in that direction) and make press releases about the amazing stuff they were doing and produce nice glossy brochures. They'd then use this material to hard sell the stocks by phone. When the companies failed they'd then run off with the money paid for stocks knowing that they'd never have to pay out. (I don't fully understand the mechanics of this despite reading an article in Time about this exact scam.) Anyway, on the list of companies being traded, there was our company!

        The key staff (who actually did work) at the company jumped ship. Almost everyone else followed. But bizarrely the company didn't need any staff to continue its scamming. They carried on making press releases describing their (imaginary) work and I remember reading a news story in which I myself was quoted talking about my work there, long after I left! On the basis of this they managed to get multi-million dollar grants from a US city famous for its Mafia connections and presumably, with few staff to pay, the CEO could pay himself very handsomely.

        One day I want to write a book about our company. (I did start a Wikipedia entry which hasn't been deleted yet.) Sadly I think of it as 'ours' because a bunch of us worked hard to make it a world-class company that competitors looked up to. Unfortunately, due to the large number of Italian names of the people involved, and the aforementioned reputation of the city that was involved, I might wait a few years.

  • Comment removed based on user account deletion
  • Where is this list of 100 companies? I couldn't find it. Did they leave it out to save space or something?

  • libertarianists (Score:4, Interesting)

    by wall0159 ( 881759 ) on Tuesday July 18, 2006 @08:43PM (#15740653)
    I think this is a good illustration of the free market operating to transfer money and power from the many to the few. I believe in renumeration comensurate with performance, but to argue that a CEO is 1000x (number pulled from ass) more valuable to a company than it's employees on the ground is just ludicrous. The management skills required to run companies are not as rare as the salaries of these people would indicate - especially when one considers the pathetic (and oftentimes illegal) way in which these companies are commonly run.

    Thus we have an example of the wealth of the many being transfered to the few (in a manner not based on merit, but rather, groupthink), and why a _totally_ free market is a terrible thing, and not in the interests of the majority.

    • Re:libertarianists (Score:3, Insightful)

      by lbrandy ( 923907 )
      ...but to argue that a CEO is 1000x (number pulled from ass) more valuable to a company than it's employees on the ground is just ludicrous.

      Is it really? How do you quantify value? How do you choose it? Is it equally ludicrous that we have "argued" (which is a strange verb to use for a free market) that a set amount of protons, neutrons, and electrons, conviently in the form of an ounce of gold is equal to about 650$, whereas roughly the same number of protons, neutrons, and electrons in the form of an

      • Re:libertarianists (Score:3, Insightful)

        by epiphani ( 254981 )
        Did it ever occur to anyone that, on average, CEOs create jobs, grow companies, and increase wealth of themselves and others? Evil sons of bitches.

        And?... cause I do all these items as well. The difference between a good manager and a crappy manager is a big one, and it applies all the way up the chain of command in a company, but CEO's dont magically create jobs or grow companies. There is no excuse to pay someone over a million dollars in SALARY. In fact, I would think anything more than a half mil wou
  • A simple way to slow down inflation of CEO compensation would be to limit them to serving on one board of directors at a time. The norm today is for CEOs to be on the board of multiple companies. So there's a great motivation and ability to use their power to maintain or raise CEO compensation in general and consequently their own specifically.

  • Easy money (Score:3, Insightful)

    by amightywind ( 691887 ) on Tuesday July 18, 2006 @09:00PM (#15740723) Journal

    One of the worst aspects of the governance of publicly held American companies is excessive, non-competative compansation of corporate officers. It grew to an extreme in the dot com bust of 2000. Many elements of corporate governance since been improved. For example with Sarbanes-Oxley it is more difficult to manipulate earnings. But the process by which corporate directors are elected and CXO's are paid lacks transparency. Conflicts of interest and cronyism abound. Small shareholders have little real recourse. For corporations that seek efficiency for maximum rate of return for shareholders, curbing excessive compensation is easy money.

  • "...did you just say that the company isn't loosing money fast enough?" ...
    "Dilbert, will you stop embarrassing yourself, if you read Dogbert's book you would know that a fast growing company always looses money while it's expanding"
    "were not a fast growing company!"
    "and we never will be if we don't loose more money!"
  • Oh, that's right, the guys who said it was important to find people working for passion rather than the paycheck [slashdot.org] meant your paycheck.

    You can have all the passion you want as long as it doesn't hurt the CEO's stock options.

  • Entitlement society (Score:4, Insightful)

    by Anonymous Coward on Tuesday July 18, 2006 @09:32PM (#15740830)
    Well, I should RTFA -- this is a snap comment based on the summary.

    It reminds me of my occasional impression that at least portions of (U.S., at least) society are becoming an "entitlement" society. If you have the right background, you're effectively entitled to certain compensation. Fancy degree, prior "experience" in the right kinds of roles.

    Back in olden days, it might have been a formal family title. But with the increasingly disparate prices of various "classes" of education, the elimination of the so-called "death tax", and the like, family assets are certainly an element of the equation.

    Ivy League degree. Connections to secure "fast track" positions. Moving on before the damage catches up.

    Actually, many who might fit this description may well be competent. But I also see signs of the scenario I describe. Reminds me of a previous job, and the rotating executives at the company who seemed to be staying in position just long enough to gain a step onto the next rung of whatever ladder.

  • Compensation should be on the proxy (Score:3, Interesting)

    by Animats ( 122034 ) on Tuesday July 18, 2006 @10:31PM (#15741016) Homepage

    The total compensation (including fringe benefits) for each of the top five employees of a publicly held company has to be reported to the SEC.

    The shareholders should set that amount. You put a number on the proxy, and the share-weighted median of those values is the limit on total compensation for the top five. Management should be allowed to suggest an amount on the proxy, but that shouldn't be the default for unreturned votes.

    Now that would make management more responsive.

    For mutual funds and retirement plans, the right to set that value has to pass through to the beneficial owners. For a mutual fund, you'd specify a number on the fund's proxy, and the fund's managers would be allowed to specify the compensation limit for each company, but those choices would have to add up in some weighted way to the median of the value set by the real owners, the fundholders.

  • Agents, Lawyers and Contracts (Score:3, Insightful)

    by grumling ( 94709 ) on Wednesday July 19, 2006 @12:33AM (#15741331) Homepage
    Here's how to get paid like a CEO: 1) Get yourself an agent. 2) Put yourself in the public by getting a few articles in a trade magazine. Better yet, get on CNBC or Marketwatch. 3) Have a lawyer and your agent negotiate your... 4) Contract. If you have professionals negotiate your salary for you, you will get more money.

    Think about your current job. If you are like most of us in the USA, you were offered a position, then they told you how much it paid, and after a few days on the job, you found out what you'd be doing. All of this was decided by a professional human resources person. Hopefully they had some idea what you are worth (doubtful), and if your skills matched up with the position (unlikely, but you're flexable). Most people really don't know how to barter in the US. Part of HR's job is to make you feel like they are doing you a favor by "giving" you a job, so you'll be happy right off the bat. And since most HR folks are shielded from the work, they have to fall back to personalities (which weigh huge), training (which is useless in most positions, white or blue), and how soon you can be available (so they can stop dealing with filling this opening).

  • May be, (Score:3, Interesting)

    by Fengpost ( 907072 ) on Wednesday July 19, 2006 @02:55AM (#15741581)
    just may be some of these CEO are mentally ill. Narcissist and psycopath as CEO's. http://www.fastcompany.com/magazine/96/open_boss.h tml [fastcompany.com]

  • integrity correlates with skill but not salary (Score:4, Interesting)

    by hansreiser ( 6963 ) on Wednesday July 19, 2006 @03:16AM (#15741611) Homepage
    It makes perfect sense that the best paid executives are the worst performers. The whole process of selecting people to be on the board that sets your salary is filled with conflicts of interest. Your salary as a CEO negatively correlates with your integrity. Your integrity positively correlates with your skill, and with how well those under you work for the good of the company with you as their example.

    Those of you who discount this study, look around at the real world a bit before you do it. This study makes a lot of sense. Now how to fix it, that is the problem for us as a society....

  • Well, Duh ... (Score:3, Insightful)

    by Anonymous Coward on Wednesday July 19, 2006 @05:36AM (#15741958)

    It's elementary. Every extra $million added to the CEO's salary takes a $million from the bottom line.

    There was a nice example 2 years ago. Grasso, the chairman of the New York Stock Exchange, paid himself a salary which (including bonuses) entirely wiped out the total profits of the preceding 3 years.

    In my opinion a CEO who pays himself more than, say, 40 times the median full-time salary in the company he/she heads should be jailed for theft. And don't give me any BS about "salaries are set by the Board". The people sitting on the boards of directors are almost entirely CEOs, recent ex-CEOs, or cronies of CEOs. They'll agree to the salary of the CEO of company X, because the CEO of company X sits on (or will soon sit on) the boards which have to agree their salaries.

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