Sunday, June 3, 2012
Thomas Sowell on CEOs and CEO Salaries
"Would anyone say that the pay of an airline pilot comes at the expense of the passengers or of the airline's stockholders, when both are better off as a result if the services rendered? Would anyone even imagine that one pilot is as good as another when it comes to flying a commercial jet airliner with hundreds of people on board, so that getting some crop-duster pilot at lower pay to fly the jet would make the stockholders and the passengers better off? Yet that is the kind of reasoning, or lack of reasoning, that is often applied when discussing the pay of corporate CEOs - and virtually no one else in any other field, including professional athletes and entertainers who earn similar or higher incomes. Perhaps the most fallacious assumption of all is that third parties with neither experience nor expertise can make better decisions, on the basis of their emotional reactions, than the decisions of those who have both the experience and expertise, as well as a stake in the results."
Subscribe to:
Post Comments (Atom)
24 comments:
The last part about "Fallacious Assumptions" fits in with point I have made elsewhere about outsiders who neither have the participants' interest at heart nor any actual knowledge of what is involved meddling and setting values in these matters.
These outsiders are unqualified, completely.
This is one of the primary examples of how the system is rigged. CEOs overpaying themselves and underpaying their workers. No surprise that Will and dmarks support it. It's one of the central tenets of the wealthy and their idolizers.
Also, I DO believe many professional athletes and entertainers are overpaid.
Interestingly, the ratio of CEO/Worker pay has gone from 24x
in 1965 to a current 379x. There
are numerous arguments pro and con
as to a CEO's worth (google it).
Warren Buffet is at 11x and Cook
at Apple is at 6258x. In my experience (admittedly only 10 CEOs), they, like any other profession, run the gamut from
poor to very good: some are overpaid and some are worth even
more than they are paid.
As much as I hate to say it, gulp, on this I must agree with wd and BB-Idaho.
CEO salaries are in fact exorbitant and out of line with the salaries of those who actually produce their product for what is often worldwide distribution.
Salaries are not necessarily the issue to focus on. Bonuses in the millions for a single CEO are.
Let the market rule.Its matters not if the CEO makes five times the average worker or 5,000 times.What matters is what the business will bear.
The time in the position for a CEO in todays world is right around seven years,a generation ago it was close to 20.The pressure to deliver to share holders today is enormous.And WD,please dont make idiotic statements like "CEO's overpaying themselves." I wonder if WD would still think the system was "rigged" if he was making some serious coin? Envy is a classless thing.
Rational: Being rational, what would you propose to do about the problem?
What do you think, dmarks, ya' think that wd might be one of those absent the expertise and experience third party individuals operating totally out of emotion that Mr. Sowell was referring to? And where does he get this idiotic notion that CEOs pay themselves? They agree to take a salary, just like wd (had he the smarts, skills, and qualifications) would agree to take a decent salary, too. Dude's nuts.
This is a real touchy subject with me.What a CEO makes is no one but the share holders business.Shareholders have a yearly vote on either maintaning the present board members...who establish the salary and bonus levels for the CEO or vote them out.
I'd love to see WD work the hours a CEO of a Fortune 500 company does.
Ask the Apple shareholders if Steve Jobs was worth the money? Ask the same about Bill Gates?How about Steve Wynn? How many well paying jobs did those three create?Or,god forbid Sam Walton...how many people have roofs over their heads and drive a car today because old Sam put in those 80 hour weeks?
That whining B.S. about CEO's salary and bonuses comes from envy and nothing else....their bleeding heart crap about their fellow man is pure and simple bullshit...the only thing they are pissed off about is.....they missed the boat.
There are also numerous examples of failed CEOs walking away with golden parachutes worth millions of dollars even while their corporations are bleeding money and stockholder equity. I've got to go with w-d, BB-I, and RN on this one.
The CEO marketplace is an incestuous one.
Jerry,do you mean something like Solyndra? Or perhaps Franklin Rains at Freddie and Franny.
Jerry...thank you for making my point.If a CEO is'nt cutting it the board can make the necessary change....if the board neglects to fulfill its duties the shareholders have every opportunity to replace the board.
Rational Nation: Salaries are not necessarily the issue to focus on. Bonuses in the millions for a single CEO are.
And what about bonuses when your company loses money? Most likely Rusty, Will and dmarks are just fine with that as well. Dudes are nuts.
Jerry Critter: The CEO marketplace is an incestuous one.
Exactly. To suggest they have no input into what their salaries are is nuts.
Will: And where does he get this idiotic notion that CEOs pay themselves? They agree to take a salary...
Either the CEO himself or a board of directors with the CEO's input sets his (or her) pay. An article from Inc Magazine titled "Setting the CEO's Salary", says, "How much should you pay yourself? That's a tough question for any CEO to answer..."
So where does Will get this idiotic notion that CEOs DON'T set their own pay? That's what I wonder. Probably is a direct result of his blind worship of the wealthy... he takes what individuals like Thomas Sowell as unquestionable gospel.
I mean, that IS what Sowell was saying with that last sentence... don't you dare question CEO pay... if you do your criticisms are surely all of an "emotional" nature. Fuck him and his wealthy idolizing stooges.
Excerpt from an article by Rocco Huang, assistant professor of finance at the Eli
Broad College of Business, Michigan State University...
"Who sets the pay for the CEOs who are effectively their own bosses because they have more power than the board of directors? A CEO has financial incentives to persuade the board of directors and influence the pay-setting procedure in a direction that enriches him".
I'd like to see what RN proposes as a solution, as he is a person who doesn't like such "solutions" as having the ruling elites "solve" things by plundering more and more money for themselves.
It was noted above that the average CEO job only lasts 7 years.
But we need consider that these people very often move on after having been fired (if a couple dozen million $$ severance is firing) to another CEO job. Like poor teachers and molesting priests, in a way....
Sorry, wd, but the board of directors sets the CEO salary, not the CEO himself. http://upresidentnews.net/ceo-pay-salaries-compensation.php
And, yes, Jerry, sometimes the CEO DOES get paid a lot of money to simply go away and that does seem a little unseemly. But, so, too, does Paul McCartney's ex-wife getting all of her money in that messy divorce. The fact is that sometimes it's actually more profitable to buy out the remainder of a person's contract (same thing with sports coaches that are failing) than to have them sticking around stinking up the joint. It's life.
You're equating firing of a CEO with divorce? What? Running a corporation is like a marriage?
Kind of an awkward analogy, huh?
Will: Sorry, wd, but the board of directors sets the CEO salary, not the CEO himself.
So it's the CEO's buddies on the board of directors that usually pay the CEO the salary he wants? Sorry, but I fail to see much of a distinction.
And chances are that the CEO is a member of one or more boards of his board members companies. Like I said, the relationship is very incestuous.
You're absolutely right Jerry.
Uh, that's a huge distinction, wd. If the CEO doesn't make the right decisions for the company and the shareholders, he's gone. Ain't no buddy-buddy about it.
It's even more incestuous with the government, Jerry. I mean, just look at the people who Mr. Obama has associated with; Geithener, Emanuel, Imelt, etc. and of how a lot big business have also benefited from his policies.
The relationship between government and business is a whole other subject.
Post a Comment