The People at the Top

[mgb]

I was just reading an article about Ford's CEO making $22 million dollars last year in cash and perks, even as the company lost $7 billion dollars. Granted, he was brought in to make the company profitable but it seems like he's a large part of the reason it isn't right now.

http://www.msnbc.msn.com/id/23959693/

Now, I think he's really just like every other large company executive/head of state. There seems to be a bloated sense of importance to the position rather than just that of being a cog in a larger system.

What do you think? Do you think salaries like that are justified? Is he as important as his salary says he is? Are things like this out of touch with how the world has always operated or is this just kind of par for the course, so to speak.

[Noses]

The CEO of Tupperware Brands (and a few of the other senior execs) got a bonus because he sold off company land to make even one year. Well, you can only sell land once, and the average worker got no benefit out of it other than some good stores opening up in the area.

But the man does hand-sign all of his Holiday Greetings greetings card to every single employee, so I dunno.

[LongSilence]

It does seem to defy logic but I imagine most high-level corporate positions and their salaries plus bonuses are based upon an executive's many years of experience and previous successes. An executive who has a history of governing failing companies does not often continue to acquire the same high-paid positions. That said, there is obviously a self-perpetuating situation where those at The Top get paid huge huge sums no matter what they do. Even if they get axed for a terrible performance it is all set up so that they at least make themselves a bundle to live comfortably off.

It's the modern-day aristocracy, except it's not so much a case of simple blind inheritance. It's still the case that the ordinary workers are the ones who always suffer for the incompetence and failures of their higher-ups. But hey, the aristocrats have to have that on their conscience- after all, they are paid on account of the great responsibilities they have and their decisions potentially affect the lives of thousands. If they don't particularly care much- that's irrelevant as this aristocracy is not selected for its altruism but for its skill.

[s0978]

I was just reading an article about Ford's CEO making $22 million dollars last year in cash and perks, even as the company lost $7 billion dollars. Granted, he was brought in to make the company profitable but it seems like he's a large part of the reason it isn't right now.

? The article says Ford lost $2.7 billion in 2007, up from a $12.6 billion loss in 2006, when he was brought on. He seems to be doin pretty good.


Ford?s compensation committee determined that Mulally partially met his performance goals for the year and mostly met goals for operational effectiveness and strategic direction.

Mulally doesn't have some sort of social obligation to perform for Ford for a compensation which doesn't chafe the asses of the masses. I presume Ford is paying him what they need to, in order for him to continue to be willing to lead them. I'd also guess he took a career risk by signing on there.

[mgb]

? The article says Ford lost $2.7 billion in 2007, up from a $12.6 billion loss in 2006, when he was brought on. He seems to be doin pretty good.



Mulally doesn't have some sort of social obligation to perform for Ford for a compensation which doesn't chafe the asses of the masses. I presume Ford is paying him what they need to, in order for him to continue to be willing to lead them. I'd also guess he took a career risk by signing on there.

If they had fired everyone and shut the doors they would have lost even less money. I know that's not feasible or a good idea, but when a company is gushing money like that there has to be a lot of ways to stop the bleeding.

I believe the article also says that the union agreed to a pay cut for the employees, which probably led to a good chunk of the savings. It's not like the employees, who made the sacrifice, not just structured it or profited by it, had an opportunity to take a ride one the corporate jet whenever they wanted to.

That's a good point, are they paying him what they need to in order to keep him? I wonder what the line is there and how is so out of touch with what the average person in America makes. Is he so much more valuable or important? What makes him so?

[Madrigal]

Well you could probably guess my answer. I don't think people like that are even necessary to keep production, sales and trade organized. There have been countless examples in history of huge plants being taken over by their workers and organized perfectly without that kind of "help." The combined efforts and intelligence of any company's workers would lead to an incomparably more effective system of production - and better working conditions and wages for all - than what could be dictated by any group of hierarchs.

Just recently in Argentina there was an occupied factory trend which mostly reached small and medium businesses but also reached a huge place like Zanon, which is one of the biggest ceramics/tile factories in South America. Naomi Klein did a documentary on this. The trend showed that the workers were perfectly able to take up the tasks that company executives and bosses had either completely abandoned or neglected. These were companies that were deep in debt due to mismanagement. They were often companies which had received many subsidies from local governments (taxpayers) only to keep mismanaging those funds and acquiring more and more debt, as they say here, "emptying" the companies.

After the workers get the company back on its feet and producing more effectively under their own democratic management, the very owners who had abandoned the factories - hoping to leave the workers on the streets and sell the company - come back and try to reclaim it.

Our system is insane.

[s0978]

If they had fired everyone and shut the doors they would have lost even less money. I know that's not feasible or a good idea, but when a company is gushing money like that there has to be a lot of ways to stop the bleeding.
Stopping the bleeding is what homey is paid to do. And he seems to be doing it extremely well if he's responsible for turning that -$12.6 bill > -$2.7 bill in just one year.

I believe the article also says that the union agreed to a pay cut for the employees, which probably led to a good chunk of the savings. It's not like the employees, who made the sacrifice, not just structured it or profited by it, had an opportunity to take a ride one the corporate jet whenever they wanted to.
Isn't it Ford that recently came up with very generous optional severance and early retirement packages? I thought that was a very reasonable and responsible corporate move, the likes of which most american employees don't enjoy.

That's a good point, are they paying him what they need to in order to keep him? I wonder what the line is there and how is so out of touch with what the average person in America makes. Is he so much more valuable or important? What makes him so?
There's no objective standard for what people's efforts or talents are worth, it's determined what corporations are willing to pay. If this guy is able to demand it and be paid it, then yes, that's how valuable he is, that amount is how much he's valued.

And, there's no reason to believe most people can do what he can, or do it as well. I'm assuming he got hired for a proven track record of management performance, and that he's continuing to prove he's worth that $22 mill.

[starla]

I have a feeling this sort of thing is on it's way out. At least I hope it is. I keep seeing articles that say a CEOs past performance isn't a good predictor of future returns. Basically, the guy gets lucky at one company by making some decision that pays off big, then some other company hires him hoping that he'll use his amazing "vision" to turn their company around too. Except his "vision" was just luck, so usually it doesn't work out. Hopefully companies will realize this and stop offering ridiculous amounts of money to guys that are past their prime.

I do think most CEOs work much harder than your average union employee. I know the CEO of my company regularly puts in 14 hour days, and was doing so long before he hit upper management. I still don't think he's worth what they're paying him. The success of our company has been entirely dependent on the market, and his decisions, in the rare instances that he's made them, have sucked balls for the most part.

[mgb]

There's no objective standard for what people's efforts or talents are worth, it's determined what corporations are willing to pay. If this guy is able to demand it and be paid it, then yes, that's how valuable he is, that amount is how much he's valued.

And, there's no reason to believe most people can do what he can, or do it as well. I'm assuming he got hired for a proven track record of management performance, and that he's continuing to prove he's worth that $22 mill.

I think there is an expectation in upper management positions about what constitutes a decent salary and adequate bonus structure. An expectation that is probably relatively out of whack with normal market forces.

[trapstar]

He doesn't want to be percieved as weak n shit (http://www.ted.com/index.php/talks/view/id/29)

[mgb]

I have a feeling this sort of thing is on it's way out. At least I hope it is. I keep seeing articles that say a CEOs past performance isn't a good predictor of future returns. Basically, the guy gets lucky at one company by making some decision that pays off big, then some other company hires him hoping that he'll use his amazing "vision" to turn their company around too. Except his "vision" was just luck, so usually it doesn't work out. Hopefully companies will realize this and stop offering ridiculous amounts of money to guys that are past their prime.

I do think most CEOs work much harder than your average union employee. I know the CEO of my company regularly puts in 14 hour days, and was doing so long before he hit upper management. I still don't think he's worth what they're paying him. The success of our company has been entirely dependent on the market, and his decisions, in the rare instances that he's made them, have sucked balls for the most part.

If the last few months are any indication I think there are going to be a ton of layoffs over the next few years and those at the top are going to have an easier time cementing their futures than the people below them because they are going to have the resources to secure themselves.

I don't think it's fair to compare the average day of a union employee and an exec. CBC used to do this show where the CEO of a company would switch positions with one of it's employees for a couple of days. It's pretty fair to say that they both had their own struggles during the switch, with neither operating seamlessly through their new jobs.

[Hustler]

If they had fired everyone and shut the doors they would have lost even less money. I know that's not feasible or a good idea, but when a company is gushing money like that there has to be a lot of ways to stop the bleeding.
I actually don't think that's true. I think the company would lose a ton of money paying leases, taxes, honoring contracts, paying an army of attorneys and accountants to handle the inevitable backlashes, and so on. Your statement would be true (probably) for some sort of mom and pop corner shop, but not for a multinational corporation like Ford. Simply stopping everything would cost them far more than $2.7 billion dollars.


I have a feeling this sort of thing is on it's way out. At least I hope it is. I keep seeing articles that say a CEOs past performance isn't a good predictor of future returns. Basically, the guy gets lucky at one company by making some decision that pays off big, then some other company hires him hoping that he'll use his amazing "vision" to turn their company around too. Except his "vision" was just luck, so usually it doesn't work out. Hopefully companies will realize this and stop offering ridiculous amounts of money to guys that are past their prime.
In thousands of years of human civilization, people have never been able to understand the role of luck in all aspects of our lives. I think you're being a little optimistic when you say you have a feeling this thing is on its way out. Whether it's a football coach going for it on 4th down instead of punting, a CEO deciding to move 20% of production to a different state, or a hedge fund manager thinking it's time to buy up some German grocery store stock, the average person (or shareholder) simply cannot distinguish skill from luck and, in fact, it is often statistically impossible to tell them apart, given the limited number of important decisions we make in our lifetimes.


I think there is an expectation in upper management positions about what constitutes a decent salary and adequate bonus structure. An expectation that is probably relatively out of whack with normal market forces.
People are afraid of the unknown, and an uncertain market is very daunting. Shareholders want someone to lead them. Employees want someone to lead them. People are willing to pay a lot for this peace of mind, especially if it saves them from having to educate themselves and make their own decisions. This is the value of a CEO. It is someone you can trust, and someone you can blame. And, if you want someone with a "proven record" that probably means you're trying to hire someone who has already been successful somewhere else, so good luck getting him to come work for you for chicken scratch under eight figures.

[mgb]

People are afraid of the unknown, and an uncertain market is very daunting. Shareholders want someone to lead them. Employees want someone to lead them. People are willing to pay a lot for this peace of mind, especially if it saves them from having to educate themselves and make their own decisions. This is the value of a CEO. It is someone you can trust, and someone you can blame. And, if you want someone with a "proven record" that probably means you're trying to hire someone who has already been successful somewhere else, so good luck getting him to come work for you for chicken scratch under eight figures.

That's kind of the thing, he didn't really have a ton of experience going into this.

And could anyone really I guess? I mean, how many people have run something that size before? A few hundred? A couple of thousand? With that said, I realize that should make them extremely valuable, but I think it's to the point where a new class of people are being created that are a deviation from market forces.

Think of it this way, the wage negotiation should be a battle between the company and the CEO. The company should want to pay the CEO as little as he'll take the job for. While the CEO should be making the company pay as much as they can to make it happen. More like a sports team in negotiations with it's star player. Game theory I guess. But in this case, and many large corporations, it seems like the companies are tripping over themselves to pay the CEOs as much as they possibly can, no matter what is going on in the world.

You're also getting mercenary CEOs brought in to slash and dash. They do as little work as they can and get out with as much money as they can, pretty much pitting as many players against each other as possible in order to extract as much as they can. It's like a global Yojimbo. I think you kind of went over this in another thread, exploitation of inefficient systems.

The problem is, I think s0 is wrong in some respects and these guys do have a social responsibility in these situations. And as Madrigal pointed out, I think you might be wrong about responsibility. I think it's a lie these guys propagate over and over to justify what they make.

[Hustler]

That's kind of the thing, he didn't really have a ton of experience going into this.
Wrong. He was the President of Boeing for 8 years, and also the CEO for 6 of those 8 years. Considering how long it takes to climb that high on the corporate ladder in a Fortune 500 company to get to the point that you're running it, that means he probably had at least as much experience as any viable candidate. I don't know what you think "a ton of experience" is, but there aren't a lot of guys who have been sitting atop major companies for 8 or more years who are looking to move over to Ford, because it takes too long to get to the CEO spot in the first place in order to start building experience.


And could anyone really I guess? I mean, how many people have run something that size before? A few hundred? A couple of thousand? With that said, I realize that should make them extremely valuable, but I think it's to the point where a new class of people are being created that are a deviation from market forces.
There are precisely six companies in America bigger than Ford, in terms of gross revenue. So, no, there are not a lot of people who have run something the size of Ford before. Boeing is the 28th largest company in the America, and is about 38% the size of Ford. That at least makes hiring a successful CEO from Boeing a reasonable move by Ford.


Think of it this way, the wage negotiation should be a battle between the company and the CEO. The company should want to pay the CEO as little as he'll take the job for. While the CEO should be making the company pay as much as they can to make it happen. More like a sports team in negotiations with it's star player. Game theory I guess. But in this case, and many large corporations, it seems like the companies are tripping over themselves to pay the CEOs as much as they possibly can, no matter what is going on in the world.
Alex Rodriguez makes more than this guy, and that's without endorsement deals. Apparently, you haven't completely thought this analogy through.


The problem is, I think s0 is wrong in some respects and these guys do have a social responsibility in these situations. And as Madrigal pointed out, I think you might be wrong about responsibility. I think it's a lie these guys propagate over and over to justify what they make.
Well, that's a matter of philosophy. What shareholders think justifies a salary and what your morals lead you to believe justifies a salary are likely to be two completely different things. If you really want to get down to responsibility, then you have to ask why it is that people are so ignorant about economics, statistics, and luck, and why have they always been that way. Like starla pointed out and I reiterated, luck governs most of the success people experience in business and, more generally, in life. Most companies could have a chimp with a magic eight ball running things and it wouldn't make as much of a difference as the completely unpredictable whims of the market and unexpected events that happen everyday do to a company's bottom line.

It is this statistical nature of the universe, from DNA replication to Ford Motor Company's annual losses, that has people worshipping in churches, electing presidents, believing that a revolution will come, and paying CEOs incredibly large salaries. So, yes, it is an inefficient system -- with the chief villains responsible for this inefficiency being fear and hope -- and people are exploiting it, but you're talking about basic elements of human nature. And so when you ask whether this is out of touch with reality or par for the course, I'm just letting you know, right or wrong, that it's par for the course. The disparity between the CEO and janitor isn't much different than that between the king and the peasant. You can hope for better and even fight for better but, in the cold light of reason, you're just playing out a part that someone else has for centuries, and logic dictates that your hopes and efforts make you just another cog in an exploitable system. Hope, and the belief you can make a difference, is just as exploitable as fear and the belief that you can't, and sooner or later someone (http://peasantswithpitchforks.com/point/images/hac.gif) will come along to capitalize on it. There's no reason to think that things will or should change when the status quo has been going on since before people were speaking Latin, and efforts to change this merely continue to reframe the system, not alter it in a fundamental way. But, if it makes you feel better to hope for better and fight for what you think is right, then go for it. There's a chance it matters.

[MacGuffin]

Alex Rodriguez makes more than this guy, and that's without endorsement deals.

Complete derail:

Question: who makes the largest salary?

Not the richest person, but who actually draws the largest annual salary in the world.

I don't count part-owners that pay themselves as employees either.

[mgb]

Wrong. He was the President of Boeing for 8 years, and also the CEO for 6 of those 8 years. Considering how long it takes to climb that high on the corporate ladder in a Fortune 500 company to get to the point that you're running it, that means he probably had at least as much experience as any viable candidate. I don't know what you think "a ton of experience" is, but there aren't a lot of guys who have been sitting atop major companies for 8 or more years who are looking to move over to Ford, because it takes too long to get to the CEO spot in the first place in order to start building experience.

According to wikipedia he was a VP from '94 until '97. President from '97 to '01. It says he had CEO duties from '01 on to '06 I presume but was never their formal CEO, having passed up the job in favor of Ford.

You said the job was about taking the blame. He'd come close it seems, but had never really put his head on the chopping block until he got to Ford.

I could have read wikipedia wrong though.



There are precisely six companies in America bigger than Ford, in terms of gross revenue. So, no, there are not a lot of people who have run something the size of Ford before. Boeing is the 28th largest company in the America, and is about 38% the size of Ford. That at least makes hiring a successful CEO from Boeing a reasonable move by Ford.

Yes. However, since they were willing to hire outside the company, there were probably hundreds, if not thousands of high level execs capable of doing the job, worldwide. I'd say they wanted him more than he wanted them.



Alex Rodriguez makes more than this guy, and that's without endorsement deals. Apparently, you haven't completely thought this analogy through.

Rodriguez makes more than the Marlins (http://www.newsvine.com/_news/2008/04/01/1404271-a-rod-makes-more-than-marlins-roster). Steinbrenner if crazy. If anything, Steinbrenner is applying CEO economics to baseball rather than the other way around. And judging by the number of World Series Rodriguez has under his belt, he's over paid.



Well, that's a matter of philosophy. What shareholders think justifies a salary and what your morals lead you to believe justifies a salary are likely to be two completely different things. If you really want to get down to responsibility, then you have to ask why it is that people are so ignorant about economics, statistics, and luck, and why have they always been that way. Like starla pointed out and I reiterated, luck governs most of the success people experience in business and, more generally, in life. Most companies could have a chimp with a magic eight ball running things and it wouldn't make as much of a difference as the completely unpredictable whims of the market and unexpected events that happen everyday do to a company's bottom line.

It is this statistical nature of the universe, from DNA replication to Ford Motor Company's annual losses, that has people worshipping in churches, electing presidents, believing that a revolution will come, and paying CEOs incredibly large salaries. So, yes, it is an inefficient system -- with the chief villains responsible for this inefficiency being fear and hope -- and people are exploiting it, but you're talking about basic elements of human nature. And so when you ask whether this is out of touch with reality or par for the course, I'm just letting you know, right or wrong, that it's par for the course. The disparity between the CEO and janitor isn't much different than that between the king and the peasant. You can hope for better and even fight for better but, in the cold light of reason, you're just playing out a part that someone else has for centuries, and logic dictates that your hopes and efforts make you just another cog in an exploitable system. Hope, and the belief you can make a difference, is just as exploitable as fear and the belief that you can't, and sooner or later someone (http://peasantswithpitchforks.com/point/images/hac.gif) will come along to capitalize on it. There's no reason to think that things will or should change when the status quo has been going on since before people were speaking Latin, and efforts to change this merely continue to reframe the system, not alter it in a fundamental way. But, if it makes you feel better to hope for better and fight for what you think is right, then go for it. There's a chance it matters.

I'm more of an observer than a revolutionary. I have opinions but they rarely get past that. I agree that the trend is older than corporations and will continue on past their existence. That doesn't change my opinions about the morality of it all or make me hope any less than that the system will change for the better.

So yes, striking at the root of the problem, morality. I'd argue that this class of people, be it CEOs or royalty, is above the morality that faces everyone else in the world on a daily basis and that they are above justification for their position in life.

[rainfall]

Our system is insane.


Our system is insane.

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Our system is insane.

Our system is insane.

Our system is insane.

Our system is insane.

Our system is insane.

Our system is insane.

Our system is insane.

Our system is insane.

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Our system is insane.

Our system is insane.

Our system is insane.

Our system is insane.

Our system is insane.

Our system is insane.

That.

[doob]

...and efforts to change this merely continue to reframe the system, not alter it in a fundamental way.
:theclap:

[Gracchus]

Past performance may be based on luck, but what other measure do they have? I find it strange that people spend so much time debating CEO salaries when they are set by the BOD who represents the largest stakeholders in company performance. It has nothing to do with fairness. Boards make stupid decisions all the time, but they do so to their own detriment, and they eat the largest losses in absolute (though probably not relative) terms. I imagine finding and retaining good executives sounds a lot easier than it actually is. My opinion is that people are too quick to devalue the jobs executives do. Not that I really care for them. But mankind will never be able to function without kings, they have been stitched into the fabric of our being.

[mgb]

But mankind will never be able to function without kings, they have been stitched into the fabric of our being.

Why?

[Gracchus]

Why?

People just don't seem to cooperate with each other in the long run. Even good systems seem to eventually turn into anarchy and lawlessness after the tyrant is removed. The masses seem to want to be lead at some level, and only Kings seem to be able to get large masses of people to cooperate towards some goal. Perhaps our tribal caveman DNA has not caught up to the realities of the modern world. I don't know, perhaps I'm wrong. Perhaps a system designed well enough could really function without an executive. But I see the system eventually sinking into anarchy, until a new King emerges and takes power, most likely by force, and the people at the time see him as a hero because he finally stopped the violence and chaos. It is just an observation, a deduction by extraverted thought based on how I view historical experience, but I don't know if I can really give you a good underlying "why." I just don't see any systems existing without Kings. Even democracies and republics have kings, although they are held accountable to the system, and their powers aren't always absolute, and yet they seem to enjoy a disproportionate amount of wealth and power over the system, if only for a limited time. So I can't think of any systems or societies existing without Kings, but of course my definition of King may be a little fuzzy.

[Hustler]

Question: who makes the largest salary?

Not the richest person, but who actually draws the largest annual salary in the world.

I don't count part-owners that pay themselves as employees either.

Probably Howard Stern.

[rawr]

A CEO getting a 22m bonus more or less has to be approved by the board of governors. If they don't like it they can appoint someone else, it's their stock.

[Hustler]

Rodriguez makes more than the Marlins (http://www.newsvine.com/_news/2008/04/01/1404271-a-rod-makes-more-than-marlins-roster). Steinbrenner if crazy. If anything, Steinbrenner is applying CEO economics to baseball rather than the other way around. And judging by the number of World Series Rodriguez has under his belt, he's over paid.
He signed the richest contract in sports history with the Texas Rangers, actually. He has recently signed a new one with the Yankees that topped that, though maybe not when you count for inflation. So, this phenomenon is in no way isolated to Steinbrenner. He has all around impressive numbers and multiple MVP awards, so it's hard to say whether or not he is overvalued. Given that each post-season game played in Yankee stadium is worth millions to the Yankee organization, it doesn't take long before marquee players have paid for themselves, if they're really that good. And, by all metrics available in baseball, he is very good.

[dubbeltop]

The People at the Top

I'm a free man , I don't need anything more than I can eat....

[mgb]

He signed the richest contract in sports history with the Texas Rangers, actually. He has recently signed a new one with the Yankees that topped that, though maybe not when you count for inflation. So, this phenomenon is in no way isolated to Steinbrenner. He has all around impressive numbers and multiple MVP awards, so it's hard to say whether or not he is overvalued. Given that each post-season game played in Yankee stadium is worth millions to the Yankee organization, it doesn't take long before marquee players have paid for themselves, if they're really that good. And, by all metrics available in baseball, he is very good.

I think the Yankees could draw the crowds if they put a bunch of apes in uniforms on the field, they are the Yankees.

A case could be made that it's better to have him as a Yankee than it is to have him as a competitor. I could see why he's paid so much then.

All in all, sports figures are thought of more like gladiators than they are like senators. They don't "work there way up" to anything. They are either good at a sport or not good at a sport. And if they are good they get paid an obscene amount of money to do it. They are entertainers, once they retire their power evaporates.



Complete derail:

Question: who makes the largest salary?

Not the richest person, but who actually draws the largest annual salary in the world.

I don't count part-owners that pay themselves as employees either.

Steve Jobs $646 million in 2006 according to Forbes (despite his $1 salary). The problem with your caveat is that most of the earnings are in stock options, which makes them all owners in a way. The next person down on Forbes 2007 list is Ray Irani, the President of Occidental Petroleum at $460 million.

[MacGuffin]

Probably Howard Stern.

Can't find exact numbers, but that may be right.


Steve Jobs $646 million in 2006 according to Forbes (despite his $1 salary). The problem with your caveat is that most of the earnings are in stock options, which makes them all owners in a way. The next person down on Forbes 2007 list is Ray Irani, the President of Occidental Petroleum at $460 million.

Yes, I'm looking for straight up monetary compensation.

[mgb]

Can't find exact numbers, but that may be right.



Yes, I'm looking for straight up monetary compensation.

I'd guess someone in Dubai - I'm guessing the highest paid person is probably somewhat unverifiable and maybe even unknown to the public.

[indie]

Interesting article in the NY Times today about executive compensation. Apparently a bunch of shareholders are upset because shares have dropped in value while executive compensation has gone up. Registration is required I think. but here's the link

http://www.nytimes.com/2008/04/06/business/06comp.html?_r=1&hp=&oref=login&pagewanted=all

. . . and a relevant passage:


The compensation research firm Equilar recently compiled data about chief executive pay at 200 companies that filed their proxies by March 28 and had revenues of at least $6.5 billion. And the data illustrates Mr. Hodgson’s point. It shows that average compensation for chief executives who had held the job at least two years rose 5 percent in 2007, to $11.2 million (If new C.E.O.’s are counted, that number is $11.7 million). Even though performance-based bonuses were down last year, the value and prevalence of discretionary bonuses — ones not linked to performance — were up. A result is that C.E.O.’s who have held their jobs for two years received an average total bonus payout of $2.8 million, up 1.1 percent from 2006.

Can't say I blame them for being upset. CEO pay can be ludicrous.

[Hustler]

Can't find exact numbers, but that may be right.

$100 million/year is what he makes in his deal with Sirius.

If you add up all sorts of endorsements and so forth, some professional athletes come close to that figure, and some entertainers might get involved with movie/music/concert tour deals that add up to a lot (but it varies considerably every year for them) but in terms of straight salary, I think Howard Stern is the highest out there, and may actually be higher than even the highest paid athletes and entertainers. Just to put it in perspective, Tiger Woods is probably at the very top of the celebrity world these days in terms of earnings. Here are some figures:

5-year $105 million contract with Nike, 5-year $40 million contract with Buick (probably rivaling or surpassing their CEO's salary), 5-year $100 million contract with Gatorade, undisclosed contracts with Gilette and TAG Heuer and a line of video games. So that's $50 million+ in contracts right there, and possibly a lot more. And this doesn't count his PGA tour earnings or his earnings from Tiger Woods Design, which are both substantial (especially when you consider he's designing a golf course in Dubai).

People like Oprah, Spielberg, and Jay-Z make more, but they are moguls at this point, and aren't really drawing salaries. Overall, though, it gets very difficult to disentangle salary from ownership stake from side deals and so on when it comes to high stakes celebrities.

[s0978]

The problem is, I think s0 is wrong in some respects and these guys do have a social responsibility in these situations.

boo hoo!

Actually, what I said was:

Mulally doesn't have some sort of social obligation to perform for Ford for a compensation which doesn't chafe the asses of the masses.


If I were recruiting you to perform some work for me, and you could command substantially higher compensation elsewhere, you're not obligated to take the job. It may even not be fair to you. That's all.

[mgb]

boo hoo!

Actually, what I said was:


If I were recruiting you to perform some work for me, and you could command substantially higher compensation elsewhere, you're not obligated to take the job. It may even not be fair to you. That's all.

Meh. Still think you are wrong. Social responsibility to the masses - social responsibility to the company. In some regards, given the stakes, it might be considered irresponsible of him to walk away in the middle of a job (getting Ford out of the hole), especially if it was because he could command a higher salary elsewhere. With great powers comes great responsibility.

[Spartan26]

The article says Ford lost $2.7 billion in 2007, up from a $12.6 billion loss in 2006, when he was brought on. He seems to be doin pretty good.One thing the article fails to mention was the reason behind the $12.6 B loss. It says slumping industry but that hardly tells the state of the company. There's a huge difference between a company that's "losing money" (net losses) and one that "fails to meet earnings," which is generally what Wall St finds alarming.

How much of the 12B was based on Ford's completed purchase of Jaguar? What new debt are they going to book for the year? Does any of this have to do w/R&D, like hybrid SUV's that regardless of cost wouldn't book earnings until 2-3 years down the line? They could open a $2 B line of credit with say Citi Corp but really their first interest payment may not be due until 6 mos later, which would be in the next fiscal year, and a significantly smaller expense, not really a strain to the company.

Think of it this way, the wage negotiation should be a battle between the company and the CEO. The company should want to pay the CEO as little as he'll take the job for. While the CEO should be making the company pay as much as they can to make it happen. More like a sports team in negotiations with it's star player.


Past performance may be based on luck, but what other measure do they have? I find it strange that people spend so much time debating CEO salaries when they are set by the BOD who represents the largest stakeholders in company performance. It has nothing to do with fairness. Boards make stupid decisions all the time, but they do so to their own detriment, and they eat the largest losses in absolute (though probably not relative) terms.
Though not CEO, Michael Ovitz was hired to be president of Disney back in the mid 90's. Barely over a year later he quit and took a $130 Million golden parachute with him. Some Disney stockholders filed a class action suit against the board for I believe the term was fiduciary irresponsibility. They basically thought it was bs that he should be paid so much when there was nothing to support that figure.

Ovitz, like his predecessor, Jeffry Katzenberg, who went on to be a co-founder of Dreamworks, was to receive a small percentage of any revenue generated by products developed during his tenure. I think in Katzenberg's case it was 2%. A lot of people question whether Katzenberg can actually "develop" films as opposed to just "pick" the right ones and thus wonder how justified he should've been to this rate. Regardless of position in the argument, the kind of amazing thing is that Disney didn't even bother to pay him what they promised anyway. And they admitted it. Jeffery of course sued.

Disney at first said they were prolly delinquent in $80-$90 M in payments. Katz said it was more like $350 M. Initially during the trial, K's peeps tried to say how rich Disney was and how much they had made and what they expect to make. Disney hired outside people to dispute their figures and show what the value truly was. Katz' figures were shot up but instead of putting the company's true value before the court, and thereby the rest of the world, Disney decided to settle at that point so that shareholders & Wall St wouldn't know their company wasn't as mighty as projected.

Ovitz' figure, as I'd suspect other top exec's pay, could be based on potential earnings made during his time on board. What's rarely discussed in the incentives are restrictions and freeze outs. There's prolly a period of time before a CEO is eligible to cash out any stock paid bonuses. Also, top mgmt and shareholders are required by the SEC to disclose sales of company stock over a certain percentage. This gets reported publicly. If the CEO of Ford gets a $10 M stock bonus and then turns around and liquidates half of it, it'd cause a major sell off as a vote of no confidence in the company. That remaining $5 M would turn into $1 M overnight. Martha Stewart got busted because she knew one company wasn't going to make earnings and the stock value was going to go down, so she sold off shares but then lied about her knowledge. One thing that I don't know if it's changed but people would have 60 days I believe before they had to report major sales, which can still leave investors over a barrel if it's not until 2 months down the line that they find out the CEO has already jumped ship.

Companies will also give CEO's large salaries to give the appearance of greater financial health. $15 M in stock doesn't hit their bottom line like salary expense. Which is not to say the bonuses are completely phantom. I think it's kinda interesting that companies will dip into pension funds to remain solvent before selling off more shares to return to general fund.

[mgb]

One thing the article fails to mention was the reason behind the $12.6 B loss. It says slumping industry but that hardly tells the state of the company. There's a huge difference between a company that's "losing money" (net losses) and one that "fails to meet earnings," which is generally what Wall St finds alarming.

How much of the 12B was based on Ford's completed purchase of Jaguar? What new debt are they going to book for the year? Does any of this have to do w/R&D, like hybrid SUV's that regardless of cost wouldn't book earnings until 2-3 years down the line? They could open a $2 B line of credit with say Citi Corp but really their first interest payment may not be due until 6 mos later, which would be in the next fiscal year, and a significantly smaller expense, not really a strain to the company.




They bought Jaguar almost 20 years ago. While it hasn't made them any money, I'm sure they've managed to pay it of by now. So while Jaguar was hurting them I'm not sure it was enough to make up the differences you are talking about.

Ford stocks have been tumbling for the last 10 years. (I hope the link works)

http://investing.businessweek.com/research/stocks/charts/charts.asp?symbol=F

Domestic automakers are facing a huge slump and with rising gas prices it'll probably get worse. They are facing stiffer competition from overseas and growing production costs.


This might be a stretch but not to mention that I bet a lot of the people who defaulted on their houses are probably going to end up defaulting on big ticket items like cars as well, and since I think Ford's financing is in house they'll either lose money through that or due to a market flooded by low cost late model domestic cars and trucks.


Anyways, Ford aside, the issue is really that a class of people are being created/maintained on the backs of the rest of society on what might be arguably be considered a record wide schism in a manner (credit) that has probably never been as widely used before.

[s0978]

Meh. Still think you are wrong. Social responsibility to the masses - social responsibility to the company. In some regards, given the stakes, it might be considered irresponsible of him to walk away in the middle of a job (getting Ford out of the hole), especially if it was because he could command a higher salary elsewhere. With great powers comes great responsibility.

Well, have to say I'm glad I don't live in your idealized world, Spidey's Uncle.

[Hustler]

Anyways, Ford aside, the issue is really that a class of people are being created/maintained on the backs of the rest of society on what might be arguably be considered a record wide schism in a manner (credit) that has probably never been as widely used before.

The difference isn't any wider than that between pharaoh and slave. Thus far, you have failed to make any convincing argument for your position, if you even really have a position. Yes, the people are the top are still much, much better off than the people at the bottom. This is not news.

But, lack of arguments aside, it seems some people do feel the same way as you. Namely, Bill & Melinda Gates, Warren Buffet, and so on. They're already doing as much for global health as the World Health Organization (probably more, considering their roughly equivalent expenditures figure to be more efficient than WHO's), and that's just scratching the surface of what a charity of this magnitude can accomplish. If it turns out that this foundation ends up improving the lives of hundreds of millions of people in major ways, then maybe he really was worth his ridiculous Microsoft founder/CEO pay rate.

[Hustler]

I think the Yankees could draw the crowds if they put a bunch of apes in uniforms on the field, they are the Yankees.

You seem to have missed the point. The point was that every post season game the Yankees play is worth millions to the organization. Yes, they will draw crowds throughout the year even with a bunch of apes on the field, but they won't make it to the post season without getting some talent on board. If A-rod gets you just one more post season game than you would have had without him, then he has probably paid for himself.

[Oso Mocoso]

Steve Jobs $646 million in 2006 according to Forbes (despite his $1 salary). The problem with your caveat is that most of the earnings are in stock options, which makes them all owners in a way. The next person down on Forbes 2007 list is Ray Irani, the President of Occidental Petroleum at $460 million.

Okay, MGB I want to make this a little personal. Before I was in grad school, I was making big money a year in stock options. My salary was closer to 70K USD, which isn't much compared to what my stock options were worth. However, I put my effort into building a tech company that was later acquired by a bigger company at a very favorable rate to me stock option-wise.

In my opinion, the reason we were acquired by this larger company was because we had a lot of bright mathematicians and computer scientists working on a technology that the military/intelligence orgs wanted. Through our labor, we created a very strong cryptographic software package. The Pentagon, the CIA, the FBI, and a bunch of other organizations all wanted to purchase our software, and they would pay top dollar for support contracts where they could get in touch with a developer at a moments notice.

That's pretty valuable, right? So, I was a part owner of that company. When we got bought, it was a financial windfall. Do you think I'm obligated to other people because my labor was deemed more valuable by the market? Personally, I don't think so. I've been willing to donate my labor to charitable organizations in the past. When Hurricane Katrina happened, I gave money and I volunteered to go down there to help people. Why? Because I've had a lot of good times in New Orleans. I want there to be a New Orleans. But if you told me I *had* to give, I'd tell you to go fuck yourself.

[Hustler]

In my opinion, the reason we were acquired by this larger company was because we had a lot of bright mathematicians and computer scientists working on a technology that the military/intelligence orgs wanted. Through our labor, we created a very strong cryptographic software package. The Pentagon, the CIA, the FBI, and a bunch of other organizations all wanted to purchase our software, and they would pay top dollar for support contracts where they could get in touch with a developer at a moments notice.

That's pretty valuable, right? So, I was a part owner of that company. When we got bought, it was a financial windfall. Do you think I'm obligated to other people because my labor was deemed more valuable by the market? Personally, I don't think so. I've been willing to donate my labor to charitable organizations in the past. When Hurricane Katrina happened, I gave money and I volunteered to go down there to help people. Why? Because I've had a lot of good times in New Orleans. I want there to be a New Orleans. But if you told me I *had* to give, I'd tell you to go fuck yourself.

Once you've sold out to the CIA and FBI, you're beyond redemption, whether someone's forcing you to do charity work or whether you're doing it of your own volition. No amount of good deeds will absolve you of this crime against humanity.

[mgb]

Well, have to say I'm glad I don't live in your idealized world, Spidey's Uncle.

:D I thought you'd like that.


You seem to have missed the point. The point was that every post season game the Yankees play is worth millions to the organization. Yes, they will draw crowds throughout the year even with a bunch of apes on the field, but they won't make it to the post season without getting some talent on board. If A-rod gets you just one more post season game than you would have had without him, then he has probably paid for himself.

So, if you put a team on the field that is a bunch of apes and A-Rod, they'll be able to cover his salary in the first game of the post season and everything else is just gravy? heh heh, don't answer that.

The Yankees have pretty much always had good teams. They had a good team before A-Rod got there and they'll have a good team after he's gone. But, are then that much better of a team with him there than without him there? That's pretty debateable. Their post season record says no. I mean, he's a great player but they were getting to the post season before he was on the team. His salary as high as it is to get them to the first game of the playoffs, his salary is there to get them through the final game of the World Series, I guess the rest of the playoffs are just to cover the rest of the team's salaries.

And maybe that's the rub for CEOs. Are the companies really getting the value out of them? If we look at this differently, The CEO of Ford (who is starting to look underpaid relatively) makes $2500 a hour, assuming he works every single hour of the year. The CEO of Oxy makes $52475 an hour. Say we turn the last guy into a work week of 84 hours with a two week vacation, he makes $109,000 an hour. Now, considering minimum wage is $8 or so an hour (depending where you are) and you thought you were making a killing at online poker making $50 to $100 an hour, that seems like a lot.

[Hustler]

The Yankees have pretty much always had good teams. They had a good team before A-Rod got there and they'll have a good team after he's gone. But, are then that much better of a team with him there than without him there? That's pretty debateable.

Steinbrenner thinks so, and it's fair to say he knows more about this than you or me. As the majority owner of the Yankees, he is also the guy actually paying A-Rod that ~$27.5 million/year under his new contract as well, so, if it's a bad decision, he's eating the losses. And, extra post season games are just an example of how he can easily earn his keep. Increased publicity, media hype, merchandise sales with his name, number or picture, and so on all generate money that ultimately fills Steinbrenner's coffers. And, given that two INTPs are talking about him on a forum notorious for its apathy towards sports, I guess the publicity machine is working.

The Yankees have always had good teams because the Yankees have always paid better than any other organization -- I guarantee you Babe Ruth, Mickey Mantle, Joe DiMaggio, and so on were all commanding salaries well in excess of the league average. Moneyball shows that this approach may not be the most optimal one in terms of games won per dollar spent on talent, but it definitely works when it comes to generating World Series victories (the Yankees have by far the most of any team in history) and also generating piles of money for the team's owners.

[mgb]

Okay, MGB I want to make this a little personal. Before I was in grad school, I was making big money a year in stock options. My salary was closer to 70K USD, which isn't much compared to what my stock options were worth. However, I put my effort into building a tech company that was later acquired by a bigger company at a very favorable rate to me stock option-wise.

In my opinion, the reason we were acquired by this larger company was because we had a lot of bright mathematicians and computer scientists working on a technology that the military/intelligence orgs wanted. Through our labor, we created a very strong cryptographic software package. The Pentagon, the CIA, the FBI, and a bunch of other organizations all wanted to purchase our software, and they would pay top dollar for support contracts where they could get in touch with a developer at a moments notice.

That's pretty valuable, right? So, I was a part owner of that company. When we got bought, it was a financial windfall. Do you think I'm obligated to other people because my labor was deemed more valuable by the market? Personally, I don't think so. I've been willing to donate my labor to charitable organizations in the past. When Hurricane Katrina happened, I gave money and I volunteered to go down there to help people. Why? Because I've had a lot of good times in New Orleans. I want there to be a New Orleans. But if you told me I *had* to give, I'd tell you to go fuck yourself.

I'm really confused by this post.

So, you worked for a company for less money than you might have been able to get in order to get stock options?

And because of that you were an employee and owner of the company?

And this company irrelevantly sold stuff to the FBI and CIA?

Due to all of this you've donated tech skills and money to charitable organizations but you did it because you wanted to and not because you had to?


Is that a fair summary?

I'm going to scratch off the last two points because I think they are pretty irrelevant to the conversation. Who the products are sold to and the charity work you've done might add more to another thread.

So that leaves you working for less for stock options and you, as an owner, making money off of those stocks during a takeover. I hate to tell you this, but as much money as you made, I'm pretty sure it was a pittance compared to the people much higher up than you, which I assume you might have gathered since you are now going for an MBA. Really, what they did was give you a decent salary, and it was, and some valueless pieces of paper that they and you both thought might be worth something some day. Turns out they were worth some money, which I'm sure you were happy about. But you were more a cog in the machine more than the motor that drove it.

In terms of class structure, your salary and stock ownership puts you smack dab in the middle class. Say you made $10 million on those shares, upper middle class. Still a cog. If you'd made in the hundreds of millions on those shares, you'd get bumped up to a different class of people, but then I doubt you'd be heading back to school to get an MBA.

Really, unless it was your company or you were in upper management I'm not sure you are understanding what I mean when I say "responsibility".

[Hustler]

And maybe that's the rub for CEOs. Are the companies really getting the value out of them? If we look at this differently, The CEO of Ford (who is starting to look underpaid relatively) makes $2500 a hour, assuming he works every single hour of the year. The CEO of Oxy makes $52475 an hour. Say we turn the last guy into a work week of 84 hours with a two week vacation, he makes $109,000 an hour. Now, considering minimum wage is $8 or so an hour (depending where you are) and you thought you were making a killing at online poker making $50 to $100 an hour, that seems like a lot.

Sheldon Adelson makes $1,000,000/hour, and has for the past two years. So what? These guys all have a willingness to tolerate infinite shit in the pursuit of financial well-being, an over-the-top work ethic, and maybe even a string of good ideas, all of which are topped off with a nice, healthy dose of good fortune. The many paths to enormous wealth all share those characteristics.

By the way, I don't know where you got the idea that "I thought I was making a killing" making "$50 to $100 an hour." Both of those ideas are false. There's this thread somewhere where I mentioned playing online poker. In it, I talked about how I booked 920 hours between September '05 and September '06. I disclosed in July '06 that I was up about $200,000. Extrapolating from those figures, we get an hourly rate of $200,000/(10/12 x 920) = $261/hour. And I'm a lot better now than I was then, but I still doubt I'll ever make it to $1000/hour at this. I realize this is far, far below that of top CEOs, and I don't have a problem with that.

[Titania]

Meh, I'm not sure money's the primary means of oppressing the masses anyhow. It's a pretty good tally at the moment, but if we capped it and redistributed the wealth a little, I'm sure there'd be some other currency by which man was shitty to other men.

[mgb]

By the way, I don't know where you got the idea that "I thought I was making a killing" making "$50 to $100 an hour." Both of those ideas are false. There's this thread somewhere where I mentioned playing online poker. In it, I talked about how I booked 920 hours between September '05 and September '06. I disclosed in July '06 that I was up about $200,000. Extrapolating from those figures, we get an hourly rate of $200,000/(10/12 x 920) = $261/hour. And I'm a lot better now than I was then, but I still doubt I'll ever make it to $1000/hour at this. I realize this is far, far below that of top CEOs, and I don't have a problem with that.

I'm sure it was from somewhere in that thread. I think the thread title combined with some of your reported earnings. Maybe I added the killing part. And don't get me wrong, I think you are making a killing at it, that's a lot of money for any job, respectable by any yardstick I can think of.

But that's what I mean, they've taken respectable and turned it into obscene. Are they wrong for doing it? I'm on the fence on that. I'm more inclined to think that the system is wrong for allowing it. Maybe it's because of the ideals you mentioned, because I think a lot of people share those ideals and despite that will never see what those guys are making, let alone what you make in poker. Somewhere in there is a lie that makes it seem ok, I think.

[Hustler]

But that's what I mean, they've taken respectable and turned it into obscene. Are they wrong for doing it? I'm on the fence on that. I'm more inclined to think that the system is wrong for allowing it. Maybe it's because of the ideals you mentioned, because I think a lot of people share those ideals and despite that will never see what those guys are making, let alone what you make in poker. Somewhere in there is a lie that makes it seem ok, I think.

I don't know if it's really a lie or the same inability to understand statistics that has haunted humanity from day one cropping up again. It's not a lie to say that anyone can make it big. Anyone can. Jay-Z came out of the ghetto in Brooklyn and is now a mogul worth over half a billion dollars, and he's not even 40 yet. The lie is in perpetuating the belief that all it takes is talent, effort, hard work, innovation, etc. It takes all of that plus getting lucky, and those who start with an advantage (being born wealthy or just being born in the first world) don't need quite as much luck. In that sense, Jay-Z is lucky he never got shot or forced into prison for decades. Most people who take their shots fail, or get lost in the sea of middle-management, staying within the confines of the middle class (at best). I don't think this is ever going to change, even if the people at the top try to make it change. It will just reframe the same old dynamic again.

Bill Gates and Warren Buffet may disagree, and they may think that the people at the very top can alter the fabric of the time-honored social hierarchy of haves and have-nots by first hoarding enormous wealth and then redistributing it in an effort to even the playing field. But I don't think that will help; with a completely even playing field, you still have players who are not equal, because not everyone is equally suited to playing the game of life in such a way as to acquire the most wealth or power.

[Spartan26]

Steinbrenner thinks so, and it's fair to say he knows more about this than you or me. As the majority owner of the Yankees, he is also the guy actually paying A-Rod that ~$27.5 million/year under his new contract as well, so, if it's a bad decision, he's eating the losses. And, extra post season games are just an example of how he can easily earn his keep. Increased publicity, media hype, merchandise sales with his name, number or picture, and so on all generate money that ultimately fills Steinbrenner's coffers.

The Yankees have always had good teams because the Yankees have always paid better than any other organization -- I guarantee you Babe Ruth, Mickey Mantle, Joe DiMaggio, and so on were all commanding salaries well in excess of the league average. ARod's merchandising impact is harder to track since the Yankees don't put player names on the backs of their jerseys. Most of the jerseys sold are w/out numbers, just the New York on the front.

A guy like ARod becomes more valuable to a team by increasing ratings of televised broadcasts. The figures go up for the post season because they're of course nationally broadcast. The Yanks are promeniently featured on nalt TV throughout the season, but the percentage of post season pay is quite substantial.

I'm not sure how much bs they're allowed to throw in MLB player contracts but in the case of Beckham when he signed w/the LA Galaxy, he's gotta do so many TV appearances. So before you may have a pre-game show that gets maybe a .03 local market rating, now gets 2.8 that's a significant ad sales increase and can actually go towards justifying that salary. Though, I still don't how they can pay him that much.

Something I kinda thought was interesting at the time, back in 1999 when pitcher Kevin Brown signed the then largest contract in MLB history, Steinbrenner, who was wildly interested in the guy, (he was traded to NY three or four seasons later), said he initially passed on the Brown sweepstakes because of money. It wasn't that he couldn't afford it. He said he knew baseball salaries were headed toward the $100 M barrier, he just didn't want to be the first, and thereby eternally blamed for it, one to pay it in history.

[C.J.Woolf]

Something I kinda thought was interesting at the time, back in 1999 when pitcher Kevin Brown signed the then largest contract in MLB history, Steinbrenner, who was wildly interested in the guy, (he was traded to NY three or four seasons later), said he initially passed on the Brown sweepstakes because of money. It wasn't that he couldn't afford it. He said he knew baseball salaries were headed toward the $100 M barrier, he just didn't want to be the first, and thereby eternally blamed for it, one to pay it in history.
There is another good reason not to be the first. After a player got a record contract and his team wanted to trade him, often only the Yankees could afford him, and often he was more of a known quantity than he was before he got his first huge contract. (I could make an lengthy list of high-priced free agents whose careers went into the crapper afterward.)

In other words, Steinbrenner could watch a high-priced free agent succeed or fail under the extra pressure, and if the player succeeded then Steinbrenner would have the inside track to becoming the player's next employer. And that's the story of A-Rod in New York.

[Gracchus]

I have to agree with Hustler in his opinion that Tyche, the goddess of fortune, is a key mover in human affairs whose influence is not properly appreciated.

[skip]

I'm not sure money's the primary means of oppressing the masses anyhow

How many times have you lived on the streets?

[Archvile]

I just found this article/speech by Bill Gates (http://blog.jhong.org/2007/06/good-speech-by-bill-gates.html) no less, he talks about inequality in the world and his efforts with his foundation:

But humanity's greatest advances are not in its discoveries - but in how those discoveries are applied to reduce inequity. Whether through democracy, strong public education, quality health care, or broad economic opportunity - reducing inequity is the highest human achievement.


I talk to skeptics who claim there is no hope. They say: "Inequity has been with us since the beginning, and will be with us till the end - because people just ... don't ... care." I completely disagree.
...and more. Interesting read.