The myth of the comptetent high paid executive

PeakOutput

AskMyChocolate wrote: »

don't think this is aimed at me but I hope I have provided you with both cogent arguments and evidence. Btw, I don't know how to say this without sounding snotty, but I would advise you, just on a personal level to get somebody to proof-read your thesis. I'm sure it has no literary basis, but you seem barely literate and spellcheck will not pick up a lot of your mistakes. It will look unprofessional even if it is a financial thesis.

then,than; your,you're; whether,weather; accept,except; affect,effect; etc. If you don't cut these out your thesis will look ridicolous.

hahaha

AskMyChocolate

PeakOutput wrote: »

hahaha

Is this your rebuttal to my arguments?

whiteonion

PeakOutPut: Did you read any of my links. Are you still going to say I did not present any evidence that highly paid CEO's don't in general perform better?

PeakOutput

AskMyChocolate wrote: »

Strawman argument and ridiculously specious reasoning.

You clearly do not understand the definition of strawman

Is it not the CEO's job to ensure that he is employing high quality staff and getting value for money from his subcontractor in relation to what he is paying that subcontractor?

ultimately, of course it is and he lost his job as a result

By this logic, does it not automatically follow that the Executives (mis)running the company in his absence were both incompetent and overpaid

yes

, and provide yet more evidence that there is no direct correlation between what you pay someone and their ability to do the job they are being paid for?

no but that is not my argument, I never said there was a direct correlation to pay and performance, Ie the more you pay the better performance you get. I have specifically said more then once in this thread alone that that is not what I am saying but you continue to rattle on implying that that is my position because it suits you.

You challenged WhiteOnion to come up with ten large companies that pay their CEOs €1.

also incorrect, I challenged him to show me the companies he is refering to when he talks about successful companies with lower paid ceos

He never said that CEOs should be badly paid, he made the point that paying massive (self-awarded) salaries was no guarantee of competence in Senior Executives.

It isn't a guarantee of competence but not offering an attractive package is a guarantee of hiring incompetence, imo

I'm not sure if this is an oxymoron or a paradox, but I'm pretty sure it's one or the other.

its a paradox obviously

PeakOutPut: Did you read any of my links. Are you still going to say I did not present any evidence that highly paid CEO's don't in general perform better?

you presented one study that shows correlation but not causation and one article that shows the same.

again for what must be the 5th time, I never said that paying premium guarantees success BUT it is one important part of the package that must be offered to attract the best candidates. It is still up to the company to select the correct candidate in the correct manor and monitor them accordingly.

Is this your rebuttal to my arguments?

No its me laughing in your face for reasons I cant say here without taking a forced holiday

whiteonion

PeakOutPut, did you know that Swedish CEO's are very low paid? I guess that is why we have a bunch of hugely unsuccessful companies like Volvo, Scania, IKEA, Boliden, H&M...

Finnish CEO's are also not extremly well paid. When the share price of Nokia was at its peak the current CEO made less money than the current CEO. The CEO's get pay rices even though the company itself performs badly.

The same can be seen in other companies as well.

The Irish banking system is one example of pure and utter incompetence. These incompetent fools got paid ridiculous money to destroy the economy and yet get paid bonuses after being bailed out.

Paying excessive salaries will attract people who think only of their own paycheck and you can sure as hell expect them to not act in the best interest of the companies they work for in the long run. That is a proven fact if you just bother opening your eyes.

pow wow

whiteonion wrote: »

If you can't always blame bad performance on the CEO then maybe the CEO is not such a big factor in a company's success either...

You're the one who seems so convinced that it is.

PeakOutput

whiteonion wrote: »

PeakOutPut, did you know that Swedish CEO's are very low paid? I guess that is why we have a bunch of hugely unsuccessful companies like Volvo, Scania, IKEA, Boliden, H&M...

what is low paid iyo?

The Irish banking system is one example of pure and utter incompetence. These incompetent fools got paid ridiculous money to destroy the economy and yet get paid bonuses after being bailed out.

the difference between you an me is you blame the fact they were incompetent on their salaries were I say it has nothing to do with their salaries. I say it has more to do with incompetence at every level as far as hiring and regulation and governance goes

Paying excessive salaries will attract people who think only of their own paycheck and you can sure as hell expect them to not act in the best interest of the companies they work for in the long run. That is a proven fact if you just bother opening your eyes.

ok I give in because you have typed that it is a fact in a thread in after hours, I concede, that is reason enough to believe it to be so

you win

congrats

maninasia

feelingstressed wrote: »

A corporations only loyalty is to its shareholders.

Not to employees or community or anyone else.

If the CEO can increase the share price even by a small percentage and deliver tens or even hundreds of millions in equity, then they deserve the 500,000 or so salary
With the big money comes pressure. Much like a football manager, if you don't deliver you're sacked and reputation ruined as the media and everyone knows you failed to deliver

Not everyone can handle that.
And some people are quite content on 25k and photocopying files in an office. Good for them

Right so the CEO is responsible for increasing the income, not the sales manager, R&D head, financial guy, production manager, marketing guru, purchasing manager...all hail the super CEO who does it by himself.

PeakOutput

maninasia wrote: »

Right so the CEO is responsible for increasing the income, not the sales manager, R&D head, financial guy, production manager, marketing guru, purchasing manager...all hail the super CEO who does it by himself.

:rolleyes:

maninasia

whiteonion wrote: »

PeakOutPut, did you know that Swedish CEO's are very low paid? I guess that is why we have a bunch of hugely unsuccessful companies like Volvo, Scania, IKEA, Boliden, H&M...

Finnish CEO's are also not extremly well paid. When the share price of Nokia was at its peak the current CEO made less money than the current CEO. The CEO's get pay rices even though the company itself performs badly.

The same can be seen in other companies as well.

The Irish banking system is one example of pure and utter incompetence. These incompetent fools got paid ridiculous money to destroy the economy and yet get paid bonuses after being bailed out.

Paying excessive salaries will attract people who think only of their own paycheck and you can sure as hell expect them to not act in the best interest of the companies they work for in the long run. That is a proven fact if you just bother opening your eyes.

If you understand how boards operate you will then now that CEOs/chairmen/directors just switch around between different companies and went to the same schools and business schools, it's an incestuous relationship. They FEEL they are worth it and their peers feel it too...otherwise if the CEO is not worth that much maybe we shouldn't be getting paid so much either? (should we call it the 'Dail' effect ).
The fund managers are willing to support, in some cases, huge salaries for CEOs as they want 'their' man in place who will do their bidding. It may not be that they think he is actually worth that money but they want to have some control over the companies strategic decisions and are willing to pay for that.

maninasia

PeakOutput wrote: »

:rolleyes:

No comeback eh..because the super CEO is a myth, organisations are exactly that, organisations of professional workers and many many people have important parts to play in success or failure, often much more than the actual CEO!

whiteonion

maninasia wrote: »

No comeback eh..because the super CEO is a myth, organisations are exactly that, organisations of professional workers and many many people have important parts to play in success or failure, often much more than the actual CEO!

In fact we don't even need to hire staff in sales, production etc the super CEO is so amazing that he doesn't need no stinkin' staff.

maninasia

General General wrote: »

He's in it for the fanboy 'attention' he gets.

Haha I think he is in it for a lot more than that, his deal is very good, (5 billion in Apple stock and cash) but Steve Jobs is certainly not your average CEO and he also has a very personal connection to the company he has run...twice.

PeakOutput

maninasia wrote: »

No comeback eh..because the super CEO is a myth, organisations are exactly that, organisations of professional workers and many many people have important parts to play in success or failure, often much more than the actual CEO!

nobody, not even the person you quoted said otherwise

maninasia

whiteonion wrote: »

In fact we don't even need to hire staff in sales, production etc the super CEO is so amazing that he doesn't need no stinkin' staff.

I think you are onto something there, the staffless organisation..but we need a CEO to make sure things are going well with our cost reduction program and I'm the man for the job..eh hang on a second can somebody tel me how the coffee machine works?

maninasia

PeakOutput wrote: »

nobody, not even the person you quoted said otherwise

Don't understand your meaning, can you comment on my comments? Is the CEO worth more than the guy who designed the latest hot product, the team that worked together for two years day and night to get it to market, the patent lawyer who found a loophole to get the product to market,the R&D guys who allowed the company to breakthrough into a new area, the QC manager who runs such a type ship there has never been even one recall?

maninasia

PeakOutput wrote: »

the shareholders of exxon mobile apparently think he is however, nobody is claiming it is a linear relationship accept you

edit; if you look at their profits he is around 50% better which is the same as around 6billion dollars, again that only matters if you are trying to argue it should be a linear scale, which i am not

I think you don't have a clue, oftentimes shareholders have had no say in the CEOs pay, even if they do it's usually one group of shareholders that decides. Most of the time it is the board and an external consultant who decides without much input from shareholders.

PeakOutput

maninasia wrote: »

Right so the CEO is responsible for increasing the income, not the sales manager, R&D head, financial guy, production manager, marketing guru, purchasing manager...all hail the super CEO who does it by himself.

you responded with this to this post

A corporations only loyalty is to its shareholders.

Not to employees or community or anyone else.

If the CEO can increase the share price even by a small percentage and deliver tens or even hundreds of millions in equity, then they deserve the 500,000 or so salary
With the big money comes pressure. Much like a football manager, if you don't deliver you're sacked and reputation ruined as the media and everyone knows you failed to deliver

Not everyone can handle that.
And some people are quite content on 25k and photocopying files in an office. Good for them

nowhere in that post or anywhere else in this thread has anyone tried to say that a ceo is the only important position in a company, not one, but it suits you to put words into peoples mouths so that you can make your points sound relevant

maninasia

I'm responding to all your posts in this thread in between laughing at them.

PeakOutput

maninasia wrote: »

I'm responding to all your posts in this thread in between laughing at them.

we are both having a great laugh so

BBDBB

Hey OP

Because Im worth it:)

AskMyChocolate

Look lads, this is just turning into a slagging match with so much antipathy between the rival camps that nobody seems to be listening to , or addressing each others' arguments.

@ Peak Output, PowWow, Feelingstressed et al., there is no point in me trying to get my point across anymore. I have done my best. The only thing I can say at this point is perhaps ye could read the interview Jack Welch gave to the New York Times in 2009. He was the CEO of General Electric for 20 years and Time Magazine named him Manager of the century. He was the original drum-banger for the arguments ye have been putting across and the instigator of the belief that a CEO who increased shareholder value and maximised quarterly profits was a good CEO.

In the interview, he admits that he was utterly wrong, and that it was a "Dumbass" idea. He basically accepts that increased shareholder value and profits are not the object of a well-run company, they are the result of a well run company. The pay structures ye are advocating reward people for running a company badly, but I can't get this point across so maybe reading the article would get my point across better. It's about causation and not putting the cart before the horse.

Needless to say he was not advocating this obvious commonsense while it would have affected his personal income.;)

Glenster

---

ATTENTION MORONIC PLEBS

---

HEAR THE JUDGEMENT OF GLENSTER!

Take a look at the example of Willie Walsh at Aerlingus.

1) He was worth more than they were paying him

2) He demanded a pay increase

3) When he didn't get it he moved to BA

4) Aerlingus got a new CEO on the cheap who proceeded to drive the company into the ground

5) Aerlingus learned their lesson and are paying the new lad Big Bucks

---

THIS WISDOM WAS A GIFT OF GLENSTER

---

whiteonion

Micheal O'Learys salary was €210 000 Euro last year.
http://people.forbes.com/profile/michael-o-leary/69434

Not very high when he is in large part responsible for making air travel within Europe affordable for most people. Obviously he didn't do all this on his own though.

Rabble Rabble

Glenster wrote: »

---

ATTENTION MORONIC PLEBS

---

HEAR THE JUDGEMENT OF GLENSTER!

Take a look at the example of Willie Walsh at Aerlingus.

1) He was worth more than they were paying him

2) He demanded a pay increase

3) When he didn't get it he moved to BA

4) Aerlingus got a new CEO on the cheap who proceeded to drive the company into the ground

5) Aerlingus learned their lesson and are paying the new lad Big Bucks

---

THIS WISDOM WAS A GIFT OF GLENSTER

---

Fine, Walsh is worth his money. But thats a competitive industry, not too big to fail. Now back to most companies.

Rabble Rabble

maninasia wrote: »

Haha I think he is in it for a lot more than that, his deal is very good, (5 billion in Apple stock and cash) but Steve Jobs is certainly not your average CEO and he also has a very personal connection to the company he has run...twice.

His $5 billion is in options as far as I know. Had he ruined the company he would be worth nothing ( in Apple stock - he has other resources, of course).

Jobs is a one man wealth creating machine - Pixar, Next and Apple. Bankers - the CEOs we love to hate are not.

Here is my suggestion, you get stock options and average pay for 5 years. After that you can make money by selling options. If you lose, you lose.

Rabble Rabble

PeakOutput wrote: »

the difference between you an me is you blame the fact they were incompetent on their salaries were I say it has nothing to do with their salaries. I say it has more to do with incompetence at every level as far as hiring and regulation and governance goes

?

If you say CEO's are paid well and are worth their salary, then how can you make the claim that incompetence is not related to salary. Basically you are saying that competence is related to salary( we pay more becausewe must hire the best) but incompetence isnt.

PK2008

Isn't the CEO elected by the board of directors, which in turn is elected by the shareholders?

Its really up to the shareholders/investors to vote on how they want the company managed, its their money they're investing.

If they aren't happy with it they can vote at the AGM and/or sell their shares.

How they want their money spent is up to them - its a free world, but I'm pretty sure if the executive group are not delivering the returns they promised to the investors then they wont last too long- but again its really up to the shareholders.

karma_

AskMyChocolate wrote: »

Strawman argument and ridiculously specious reasoning. There is no reason to believe that the profitability of a company is the result of a CEO's remuneration package, or that the profitability of a company is a measure of how well it is being run. The fact that it is evidence enough for you speaks volumes about your ability to reason. I'll reduce the cost of running your BMW by putting low-grade petrol into it and no oil. Had you cited increased market share rather than profitability you may have had a leg to stand on. You have been given plenty of evidence, to refute your ridiculous theory, you have simply chosen to ignore it. Irish Bankers and Banking Executives in general in the Western Hemisphere have been amongst the highest paid executives in the world, they produced massive short-term profits and received huge bonuses. They have destroyed in the space of twenty years, thriving solid companies that it took 200 years to build.



^^^ I dealt with this last point earlier.

AMC

Monster of a post.

Well played that man!

PeakOutput

Rabble Rabble wrote: »

?

If you say CEO's are paid well and are worth their salary, then how can you make the claim that incompetence is not related to salary. Basically you are saying that competence is related to salary( we pay more becausewe must hire the best) but incompetence isnt.

I never said that, although I think it is fair to say that the vast majority of people who rise up through the ranks and eventually end up being ceos end up there as a result of showing a large amount of competence in their industry, what part of this is so difficult to understand?

you are on the board of a successful company, very successful.

your company needs a new ceo and you want to be able get someone who has a track record of being amazing, say either as a ceo or just a great business track record

you will not create much interest in that position, from the type of people you are looking for (people with a proven track record for running large logistics companies for example) unless the package is attractive to those people you won't get any applications / replies to your letters

part of that package is the salary

if the package is right then people will be interested in the position and you can then go about picking the correct candidate. thats all the package does, it makes people feel that working for that company is worth THEIR TIME after that its the companies / boards / shareholders job to make sure they are worth THEIR MONEY.

If you pick an incompetent ceo thats your problem. sometimes you will pick someone with a great track record and they just wont be able to get to grips with your company and they will be a disaster. there are literally hundreds if not thousands of variables that could go wrong or right with any particular ceo you choose.

there is also the possibility of course that you will find someone who has no experience who would be perfect for the job and he wont need as attractive a package as the already experienced ones but thats because they have not yet proved themselves in the position and are more of a risk

bringing companies who needed bailouts etc into the argument is ridicolous because they are a tiny minority of companies. I happen to think that they should be let fail unless the overall economic cost of bailing them out is less then letting them fail and I happen to think that if they are bailed out by the government they should have to follow specific regulations until they have paid all the bailout money back and are a viable business again but all that is irrelevant to the argument because they are such a tiny proportion of companies

maninasia

whiteonion wrote: »

Micheal O'Learys salary was €210 000 Euro last year.
http://people.forbes.com/profile/michael-o-leary/69434

Not very high when he is in large part responsible for making air travel within Europe affordable for most people. Obviously he didn't do all this on his own though.

MOL is smart just like Steve Jobs. He got a guarantee from Tony Ryan when they appointed him CEO for something like 10% of the profits yearly (it was a personal agreement between TR and MOL). It was a secret for many years, the other high up managers were furious when they only found out when Ryanair was going public. All the time MOL was saying we need to be focused on costs, everybody to moderate their wage requests and stock options prior to going public etc and he had this unannounced huge income that was linked to these same cost controls.

It is also true though that MOL did a phenomenal job with Ryanair and saw it through tough times to help make it the success it is today. He is obviously the type of guy who lives to work so I'm not sure how much the difference in pay deals would have made.

http://www.bloomberg.com/news/2010-09-02/ryanair-s-o-leary-ponders-pay-toilets-standing-passengers-in-profit-quest.html
'In 1987 he took a job as a financial assistant to Tony Ryan, an entrepreneur who had made a fortune in aircraft leasing and who had recently started an airline, based at Dublin Airport. (Ryan died in 2007.) O’Leary agreed to work for no base salary (THIS PART I'M NOT SURE IS ACTUALLY TRUE) and a significant percentage of Ryanair’s earnings, should the airline’s meager fortunes ever improve. The deal eventually made him one of Ireland’s wealthiest men. He currently holds 55 million Ryanair shares valued as of Sept. 1 at $5.05 each. For the first several years of its existence, Ryanair struggled. Several times, O’Leary recommended that it be shut down'

maninasia

PK2008 wrote: »

Isn't the CEO elected by the board of directors, which in turn is elected by the shareholders?

Its really up to the shareholders/investors to vote on how they want the company managed, its their money they're investing.

If they aren't happy with it they can vote at the AGM and/or sell their shares.

How they want their money spent is up to them - its a free world, but I'm pretty sure if the executive group are not delivering the returns they promised to the investors then they wont last too long- but again its really up to the shareholders.

Read the thread, that's not how it works in the real world. Besides, we are dealing with the fallacy of high pay of CEO being linked to great performance of the company.
Finally not all shareholders targets are the same, many trade on a minute/hourly/monthly basis..short-term trading that is good for immediate profits (they can get their costs reduced or R&D budget slashed with a concommitant quick increase in earnings per share) but can be very bad for company operations long-term.
Fundamentally, if CEO pay is linked to long-term sustainability and profitability that should coincide with both the interests of long-term shareholders and staff of the company alike. What is missing in these debates is that companies are really a collection of people, it's the people that make the company! Now if you get rid of the wrong people or destroy the organisation's integrity or attraction to the right people...well you have severely damaged/destroyed that company, no matter what it says on next month's balance sheet..which doesn't show the whole picture.

minidazzler

There is a great famous quote, everyone rises to their own level of incompetence. And it is damn true.

AskMyChocolate

There's a great line from the founder of Dunkin' Donuts. He said, "If you want to run the most successful Doughnut franchise in the world, don't go to Harvard and learn how to run a franchise business, learn how to make a doughnut."

This is what makes Steve Jobs, Bill Gates, and Warren Buffet different from the "career" CEOs. They know their products backwards and don't get involved in anything that they don't understand fundamentally from first principles. Also, they put their money where their mouth is; if the company fails they lose, they don't walk away with a huge personal profit at the shareholders' expense because they are the shareholders.
There's no bull****ting these guys, and they don't rely on the Andersen Consulting/Goldman Sachs old school tie network to massage their egos and justify their wages.

As Buffet said, "It's not until the tide goes out, that you can see who was swimming without any trunks."

AskMyChocolate

Rabble Rabble wrote: »

His $5 billion is in options as far as I know. Had he ruined the company he would be worth nothing ( in Apple stock - he has other resources, of course).

Jobs is a one man wealth creating machine - Pixar, Next and Apple. Bankers - the CEOs we love to hate are not.

Here is my suggestion, you get stock options and average pay for 5 years. After that you can make money by selling options. If you lose, you lose.

I worked for Microsoft for four years,while Bill Gates was still CEO, and this is pretty much how the company was run. I worked in a very low-level menial position, but Gates had the company structured in such a way that it didn't matter if you were the CEO or the toilet cleaner.
If the company did well it made a massive difference to your end of year earnings. Everybody was interested in the share price. It wasn't just a cheque for €5 at the end of the year if you were a toilet cleaner, it could be upwards of €9,000. Each manager had a certain amount of stock options he could award and it was up to him to award them to who he felt had worked hardest in the interests of the company.
There was a private mechanism in place for any staff who felt they had been unfairly treated, and woe betide the manager who was caught awarding options on a basis of personal favourites. It meant s/he would lose all of their own option awards.

He was a very bright boy Bill Gates. I don't know if it still happens now, but when I was there, 30% of the company's profits were set aside to buy back shares each year and distribute them amongst the staff.

As I said, himself and Jobs, like them or dislike them, but two clever boys.

AskMyChocolate

Rabble Rabble wrote: »

Fine, Walsh is worth his money. But thats a competitive industry, not too big to fail. Now back to most companies.

I don't agree. If Walsh was any good at running an Airline he'd be running one where he had the capacity to make a lot of money if the Airline was successful or lose a lot of money if it wasn't. This is why I have a grudging respect (although I can't stand the fcuker) for MOL.

The ultimate destiny of Aer Lingus or British Airways is immaterial to Walsh. He is in that safe comfort zone of either being enriched or being hugely enriched. There is no downside for him, only for the shareholders.
He is a typical overpaid, spoilt CEO for whom lack of performance has no personal downside. IMO.

Chocolate

AskMyChocolate

Have we lost all the drum-bangers advocating the need for excessive executive salaries? I guess it must have been the Jack Welch interview that finally broke the square. Even they can't accuse him of being a bitter little unsuccessful man (the last hopeful argument of an idiot.)
I guess I finally get to say this. I've been waiting years.

*draws curtains*

/end thread

biko

Sorry AskMyChocolate but there's more

A bank worker got the sack after she criticised her boss's £4,000-an-hour salary on Facebook.
Stephanie Bon was working as a £7-an-hour HR assistant for Lloyds Banking Group when she heard about her new chief executive António Horta-Osório's mammoth salary.
Miss Bon went on Facebook and posted 'LBG's new CEO gets £4,000 an hour. I get £7. That's fair.'
But after her bosses heard about the comment she was marched from the offices and fired.

Great job Mr António Horta-Osório. Enjoy your wealth, oh and the £900,000-a-year in pension contributions for governing the bank the taxpayers had to bailout from oblivion because it couldn't save itself.

In other news, BP are stating that it had actually had its "best year in safety performance" and was rewarding its executives with bonuses. This after the massive disaster last year. But after getting slammed big time by [some] media the company announced that the safety bonuses would instead go to families of the workers who died in the rig explosion.

How the Richest "1 Percent" Keep Rewarding Themselves for Epic Failure