19 December 2006

CEO Pay and Performance or: Do we pay people for this?

Yes we surely do and the CEOs are worth every penny - just ask them or the board member who approve the salaries.

Here's some proof of what you're getting for that pay (and if you buy a product or a service in America - you are paying their salaries).

For instance, Terry Semel of Yahoo was paid $53.3 million last year. During that time his company's stock lost 32.9% or its value. Heck of a job Terry!

CEO Richard Packer of Zoll Medical was paid a grand $530,019 last year while his company's market value almost doubled.

Now the really interesting part of this is you have to have a Harvard MBA for these figures to make any sense.

3 Comments:

At 21 December, 2006 20:16, Blogger jack perry said...

Yahoo's stock may have gone down, but isn't the company healthy overall? And if its stock is going down after being overvalued (possible), that should seem irrelevant.

That isn't to say I disagree with your main point. CEO pay is ridiculous.

 
At 21 December, 2006 22:59, Blogger Joey said...

It could be a correction, but Yahoo's earnings per share have been decreasing while the share price to earnings per share ratio has been increasing.

The CEO's pay is "only" 600k, the rest is through alternative compensation (usually options).

The market has determined what it considers an acceptable pay scale, and it rewards companies accordingly.

--Joey

 
At 23 December, 2006 19:21, Blogger Clemens said...

I dont think so Joey. Lot's of studies have been done that show NO relationship between executive pay and performance - in the market place or anywhere else. In other words, the idea that market forces shape this thing is flat wrong. Something is broken.

That's the point of the post. Not just, as Jack says, CEO pay is ridiculous (I would say obscene), but that it is not justified by perfromance.

Most boards are servile instruments of the CEO - this was certainly true of the big computer company I once worked for. The CEO basically got to set his own salary, his own perks, and even had one of the board members write a fawning bio of himself. I know - there is a copy of it setting on my shelf, signed by the author, because I helped him with some of the research.

 

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