2017 CEO vs worker compensation

[MU82]

Hyperbole aside, journalist, CEOs, athletes all have their role in society and I don't think anyone can claim one is more important than another IMO.

Also as long as the roles exist people of quality will seek to do those jobs and do it well. If Maggie Haberman we're at the NYT then someone from the Chicago Tribune or the Saint Petersburg Times or whatever would fill that role and be as good or nearly as good. Regardless of role, there are very few irreplaceable people in this world IMO.

Fair enough, mu03. I'd expect nothing less from you.

I also do allow that there are "special" CEOs. Howard Schultz built Starbucks. He left for about a decade and the company struggled mightily. He came back and the company got back on the right foot. There are similar examples with other companies, too.

Obviously, there also are "special" journalists and athletes. Those special ones are irreplaceable. But yes, there are very few of them.

[MU82]

Henry Ford's vision, drive (no pun intended) and hard work made it possible for thousands to feed their families. I think that's more important than Jim Acosta's tete-a-tetes with Stephen Colbert. Sue me.

Lenny, again, you're cherry-picking your heroes and less-than-heroes.

That's OK, we all do it.

Walter Cronkite's honesty and respectability made it possible for tens of millions of Americans to be informed. I think that's more important than Bernie Ebbers defrauding millions of Worldcom shareholders.

See?

[mu03eng]

I've always thought there's a bit of a conspiracy going on.  Who makes up the vast majority of corporate boards?  Other CEOs! And the boards set the pay for the CEOs.  So the guys all sit on each others' boards and jack the pay up for the CEO to create comparable expectations for themselves.

Further, I simply can't understand how CEOs earn bonuses when the company loses money and the share price is down.  Yet you regularly read of the CEOs who presided over these "failures" rake in bonuses of $10 million or more.

I help lead a small company.  In years we lose money, there is nothing there to pay bonuses to anyone.

Absolutely true, it's only a conspiracy in so much that no one openly talks about it.

[mu03eng]

Fair enough, mu03. I'd expect nothing less from you.

I also do allow that there are "special" CEOs. Howard Schultz built Starbucks. He left for about a decade and the company struggled mightily. He came back and the company got back on the right foot. There are similar examples with other companies, too.

Obviously, there also are "special" journalists and athletes. Those special ones are irreplaceable. But yes, there are very few of them.

Yeah I think overall the point I was trying to make is that regardless of the profession the cream generally rises to the top with some exceptions(some obvious some not so much) but at the same time while there are exceptional people they are the exception not the rule so we undersell the ability of anyone to do a job.

So overall, we have to focus our efforts on letting the cream rise to the top while giving as many people as possible the chance to be that cream....if I may really torture the metaphor

[Pakuni]

I guess so, comrade. Up the revolution!

Henry Ford's vision, drive (no pun intended) and hard work made it possible for thousands to feed their families. I think that's more important than Jim Acosta's tete-a-tetes with Stephen Colbert. Sue me.

Lame hyperbole aside, the point that seems to be evading you is that we ought not glorify Jeff Bezos' work as something noble or honorable.
His work is intended to enrich himself. There's nothing wrong with that. It doesn't make him a bad or immoral person. But he's not a hero, either. He's just a guy trying to get rich (and doing it really, really well).
He employs people not because he wants to help them or feed their families. He employs people because their labor makes his company more profitable, and therefore him more wealthy. If Bezos could use robots to do the same tasks as people and save some money in the process, he'd do it in a heartbeat. He's already done it in some ways.
Again, none of this makes him a villain. But he's not praiseworthy because his company needs employees to help it turn a profit.

[mu03eng]

Lenny, again, you're cherry-picking your heroes and less-than-heroes.

That's OK, we all do it.

Walter Cronkite's honesty and respectability made it possible for tens of millions of Americans to be informed. I think that's more important than Bernie Ebbers defrauding millions of Worldcom shareholders.

See?

What Lenny is doing is an interesting mechanism I've seen popping up in the last 5-10 years where people will put more value in the tangible than in the intangible and/or devalue the roles that don't have a measurable means of success. We can't measure how much better society is as a result of Walter Cronkite's role in it, but that doesn't mean it is less, same, or more important than say Howard Hughes role.

Take teaching, let's say there is a 2nd grade teacher that taught both Howard Shultz and Warren Buffet as well as hundreds of other people that went on to be engineers, generals, scientists, dancers, etc. Does that teacher not deserve some of the credit and if they were lower quality would that have a ripple effect through society? The idea that we are a meritocracy but somehow the jobs with the most intagibles can be done by just anyone or is a commodity is mind boggling to me.

[Pakuni]

Lenny, again, you're cherry-picking your heroes and less-than-heroes.

I'd like to think Lenny doesn't consider Henry Ford a hero.

[Lennys Tap]

First, you used Bezos -- the richest and one of the most successful CEOs in the world -- as your CEO example but "the dude that looks like a poor man's George Clooney" (I don't even know who that is) as your journalist example. I mean, I could use Jeffrey Skilling (the criminal who ran Enron) as a CEO example and Maggie Haberman as my journalist example, and the journalist would "win." Let's not cherry-pick.

And yes, I'd argue that Maggie Haberman's work today is more important than Jeff Bezos'. He can delegate to 100 people. He could take off 3 months and Amazon wouldn't miss a beat. Not saying he does, but he could.

And of course, you're right (as was I) about journalists choosing to be journalists.

Any number of intelligent world-class athletes have "what it takes" to be great CEOs. They are smart, they are leaders, they are willing to take chances, etc, etc, etc. That's why many of them become successful small-business owners, successful GMs/team presidents, etc. Yes, many fail financially once they leave the field/court ... but the same is true of many businesspeople.

While LeBron or Tom Brady or Justin Heyward could learn how to become great CEOs, there is 0.0000000% chance that Bezos or Gates or Nooyi could learn how to become a professional athlete! (And you don't claim anything different.)

I don't think we disagree on most of these things, Lenny. I simply tend to give CEOs a little less credit as being somehow presupposed to "having what it takes" to be CEOs, as if they possess some kind of gene that makes it all possible while the rest of us plebes lack it.

To me, it's like the whole "Trading Places" thing. Give Billy Ray Valentine the big office and the training while casting Louis Winthorpe III into the streets, and Billy Ray ends up being the tycoon while Winthorpe ends up in the gutter.

Of course, Winthorpe also ends up with Ophelia, so there's that!

This. We're having trouble keeping our democratic republic in one piece now. If great journalists weren't on the case, we'd be screwed.

1. Jim Acosta (CNN White House corespondent) is the George Clooney wannabe)
2. Key Lay was the CEO of Enron, not Jeffrey Skilling
3. Someone would fill the void that Maggie Haberman left more easily than the one created if Bezos stepped aside (IMHO)
4. I respect all people who are good at what they do. But certainly the kind of money that the "best" make doing certain things (playing sports, acting, winning class action suits, running large corporations, etc.,) SEEMS out of whack. But I remind myself that the market deciding such things does a better job than any government has.
5."Trading Places" is one of my all time favorite movies. The scenes in the trading pits are hilarious and, though exaggerated, kind of right on. But it's a comedy, not a documentary.

I agree that some CEOs don't cut it and are overpaid. So are some doctors, lawyers and ballplayers. But I don't envy any of them. I'd rather be happy.

[jesmu84]

Some good points raised here.

I'm also guessing execs benefit (and thus put lots of money and effort into) from legislation like keeping capital gains tax low as compared to income tax.

[Jay Bee]

The ratio of pay opportunity to actual payouts is quite high, not low, across the F500.

Got some data?

[Coleman]

#FakeNews: "CEO Mr. Smith made $30 million last year!"

Reality: Mr. Smith made $1.5 million. He also got RSUs totaling $28.5 million. If the company meets lofty performance goals over the next 3 years, he will get the RSUs. If they company does not perform, he'll get 0.

And then Mr. Smith starts buying back shares instead of investing in R&D, new products, and more employees, because it is the easiest way to inflate the price. Mr. Smith gets paid. Company goes down the crapter and gets bought out by VC. VC guts company and gets rich. Company dies. Thousands now unemployed. Mr. Smith goes to the Caymans.

Rinse, repeat!

[Lennys Tap]

Lame hyperbole aside, the point that seems to be evading you is that we ought not glorify Jeff Bezos' work as something noble or honorable.
His work is intended to enrich himself. There's nothing wrong with that. It doesn't make him a bad or immoral person. But he's not a hero, either. He's just a guy trying to get rich (and doing it really, really well).
He employs people not because he wants to help them or feed their families. He employs people because their labor makes his company more profitable, and therefore him more wealthy. If Bezos could use robots to do the same tasks as people and save some money in the process, he'd do it in a heartbeat. He's already done it in some ways.
Again, none of this makes him a villain. But he's not praiseworthy because his company needs employees to help it turn a profit.

Successful entrepreneurs provide jobs for people that feed, cloth and educate their families. Whether they celebrate that byproduct of their own success (the best do) or not, that's a fact.

[mu03eng]

3. Someone would fill the void that Maggie Haberman left more easily than the one created if Bezos stepped aside (IMHO)
4. I respect all people who are good at what they do. But certainly the kind of money that the "best" make doing certain things (playing sports, acting, winning class action suits, running large corporations, etc.,) SEEMS out of whack. But I remind myself that the market deciding such things does a better job than any government has.

Respect your opinion but I think you are wrong on these two points. The first implies that the CEO job is a rarer skill set that the investigative/corespondent which I don't think is true and/or you are placing higher value on the CEO role over the corespondent role which can be your position I just think it's incorrect. The second really depends on which stage of "Jeff Bezos, CEO" you are talking about. 1994 Bezos who has the vision, courage, and savy to see the internet transformation coming and what inefficiencies in the market it would expose that would allow him to be more competitive against larger, established book sellers is a somewhat rare breed. 2018 Bezos who has billions of dollars and thousands of employees is an entirely different CEO and I'd argue a much less rare CEO, I could name at least two dozen current or soon to be CEOs who could take over at Amazon likely without a hitch.

[TSmith34, Inc.]

Got some data?

Sure.  See attached.  (Note: None of this data is from my firm, but is consistent with what we see).

Summary:
90% of firms over an 8 year period met threshold
70% of firms met target
15% met maximum

In aggregate, company performance met 92% of goal, and variable payout was ~112% of target.  ONLY 4% OF FIRMS GRANTED NO PAYOUT.

Bottom line, if an EC consultant isn't designing a plan with easily met thresholds, they will soon find themselves replaced by a consultant more amenable to the board/C-suite

[MU82]

1. Jim Acosta (CNN White House corespondent) is the George Clooney wannabe)
2. Key Lay was the CEO of Enron, not Jeffrey Skilling
3. Someone would fill the void that Maggie Haberman left more easily than the one created if Bezos stepped aside (IMHO)
4. I respect all people who are good at what they do. But certainly the kind of money that the "best" make doing certain things (playing sports, acting, winning class action suits, running large corporations, etc.,) SEEMS out of whack. But I remind myself that the market deciding such things does a better job than any government has.
5."Trading Places" is one of my all time favorite movies. The scenes in the trading pits are hilarious and, though exaggerated, kind of right on. But it's a comedy, not a documentary.

I agree that some CEOs don't cut it and are overpaid. So are some doctors, lawyers and ballplayers. But I don't envy any of them. I'd rather be happy.

1. Oh. I rarely watch CNN.
2. Actually, both Skilling and Lay were CEOs of Enron, and both had key roles in the scandal.
3. Your opinion (as you state). I disagree.
4. I do not have a list of every occurrence of the market and the government deciding things, therefore I cannot make as firm a conclusion as you did here. I generally am a believer in the free market, though I also agree with what mu03eng says in his comment.
5. No argument.

I'd rather be happy, too. And I am. I've had a lucky life.

[Jockey]

Yeah I think overall the point I was trying to make is that regardless of the profession the cream generally rises to the top with some exceptions(some obvious some not so much) but at the same time while there are exceptional people they are the exception not the rule so we undersell the ability of anyone to do a job.

So overall, we have to focus our efforts on letting the cream rise to the top while giving as many people as possible the chance to be that cream....if I may really torture the metaphor

Your absolutely right.

If I can use BB as an analogy - no one minds Lebron making $40 mil. It's the Chandler Parsons of the world making $22+ mil that bothers people.

[MU82]

Your absolutely right.

If I can use BB as an analogy - no one minds Lebron making $40 mil. It's the Chandler Parsons of the world making $22+ mil that bothers people.

But it is not Chandler Parsons' fault that he makes $22 million.

I don't know enough about Parsons to know if he dogged it after getting the money - that would be his fault if he did. But others decided to pay him.

[real chili 83]

9,8, 7, 6, 5, 4,   

[Dr. Blackheart]

There is no democracy without journalists. There is still a democracy if Bezos dies tomorrow.

Well, Jeff does own the Washington Post.

[MU82]

Well, Jeff does own the Washington Post.

True. But his will states that if he dies, I get the Post. And I've got some big effen plans for it!

[forgetful]

3. Someone would fill the void that Maggie Haberman left more easily than the one created if Bezos stepped aside (IMHO)

Many studies prove otherwise.  Data shows that CEO performance matches that of pure chance.  Essentially the important aspect of having a CEO is making an actual decision, most of which relies upon data generated from far far lower paid individuals. 

Additionally, there is very little correlation between pay and performance at the CEO level.  Usually the best performing are amongst the lowest paid CEOs.

So why pay CEOs so much. 

The reality is that CEO pay is not because of their amazing abilities, their uniqueness, or their performance.  It is a matter of their access to "secrets".  The higher an individual climbs the ladder the more access to trade secrets the individual has.  Those "secrets" are of high value, meaning another company would pay a fortune to have access to them, and similarly, a company would pay a fortune to make sure they don't lose said "secrets".

Their performance in actuality means very little. 

There are exceptions, see Steve Jobs, but that is an outlier, not the norm.  The fact is, if Bezos wasn't around, there would have still been an Amazon, it would have still been successful, it would have just had a different face.  It wasn't like Bezos was the first to come up with the idea, or that it was even a novel concept.

Do you really think there wouldn't be an Amazon without Bezos?

[MU82]

A friend just shared this with me:

“The causes that destroyed the ancient Republics were numerous; but, in Rome, one principal cause was the vast inequalities of fortunes, occasioned partly by the strategems of the patricians.”

— Noah Webster, A Collection of Essays and Fugitive Writings on Moral, Historical, Political and Literary Subjects, 1790

[MUBurrow]

The comparison between journalists and CEOs is odd, but aside from that I find the newfound glorification of "journalism" kind of lame.  Its more a thinly-veiled litmus test on the current administration than a legitimate evaluation of the industry.

Yes, of course journalism-writ-Woodward and Bernstein is vital. But have we seriously gotten to the point of putting Maggie freaking Haberman on a pedestal? She's a hack and an access merchant. I laughed out loud at:

Well, Jeff does own the Washington Post.

because it highlights why the adoration being heaped upon "journalism" right now is so awkward. The industry's consolidation, reduction in support for investigative journalists and both sides-ism all began long before anyone uttered "fake news."  People like Maggie Haberman are a product of these problems, not a part of their solution. That doesn't make her reporting false, but it does require a degree of skepticism about everything she says that plays into the fake news narrative.

[MU82]

The comparison between journalists and CEOs is odd, but aside from that I find the newfound glorification of "journalism" kind of lame.  Its more a thinly-veiled litmus test on the current administration than a legitimate evaluation of the industry.

Yes, of course journalism-writ-Woodward and Bernstein is vital. But have we seriously gotten to the point of putting Maggie freaking Haberman on a pedestal? She's a hack and an access merchant. I laughed out loud at:because it highlights why the adoration being heaped upon "journalism" right now is so awkward. The industry's consolidation, reduction in support for investigative journalists and both sides-ism all began long before anyone uttered "fake news."  People like Maggie Haberman are a product of these problems, not a part of their solution. That doesn't make her reporting false, but it does require a degree of skepticism about everything she says that plays into the fake news narrative.

I disagree with all of this. But that's cool. We're all allowed opinions.

And in my opinion, the journalists at the Wall Street Journal, New York Times and Washington Post have been American heroes these past 2 years.

[TSmith34, Inc.]

I don't disagree with the part about Haberman being a hack.  She is to investigative journalism what the court stenographer is to the justice system.