Heard something earlier in the week to describe how crazy CEO compensation is. First off, they suffer no punishment for risky behavior that doesn't pay off. They still get their large, bloated compensations. But they do get additional compensation (outsized bonuses) if they behave in risky behavior that does pay off. Pretty sweet set-up.

Next is this: "The grave yards are full of irreplaceable people".

Elliot Spitzer writes a fine article spelling out how to cure this madness without getting the government too involved.

http://www.slate.com/id/2211481/
Snippet
Fixing the compensation debacle will require addressing the behavior of three groups: compensation consultants hired by boards, compensation committees, and, most importantly, institutional shareholders. These groups must rise up and reclaim power from a system that is now dominated by CEOs. Real progress will result not from an essentially arbitrary rule imposed by government but from a rejuvenated system of corporate governance with shareholders—the owners—having an adequate say.

Let's start with the compensation consultants. The underlying structural problem has been that compensation consultants have shown greater allegiance to the CEO than to shareholders. And no wonder: CEOs have played too great a role in selecting the consultants, and the consulting firms are often part of larger organizations performing other contracts for the company that the CEO could terminate. The fix is evident: Create a special shareholder committee to select the compensation consultant. And require these consultants to be stand-alone companies without any possible ancillary business relationships with the company that hires them. If this were done, it would be amazing to see how quickly the severance packages and parachutes would shrink. CEOs would be paid like other workers—for doing their jobs and fulfilling their fiduciary duties. They wouldn't be paid for the illusory concern that the company would collapse in their absence. Most compensation negotiations begin with the premise that the particular CEO is irreplaceable. But, as de Gaulle wryly observed, the graveyards are filled with indispensable people.

There should also be a simple rule relating to compensation committees of boards: Those who participate must be totally independent of the CEO. No conflicts, direct or indirect, should be permitted. They must have no other common board memberships, no overlapping charitable causes, no shared social clubs. Nor should compensation committee members be CEOs or executives of any rank whose own pay will in any way be measured against the pay of the individual whose pay they are setting. Most importantly, shareholders should vote directly on the constituency of compensation committees. It has become all too easy for boards to give away "other people's money" without having to answer to shareholders. Shareholders should vote every member on or off the committee and be able to propose members directly, while the CEO should have no role whatsoever in proposing membership of the committee.

Finally, and most important, it is time to realize that CEO pay is essentially the responsibility of shareholders: If they are willing to tolerate waste, they should pay the price. So, where have shareholders been? The sad truth is that corporate governance is broken because shareholders have let management run roughshod over them. But just as in politics, the power of the vote can reclaim these rights. So, here is a simple proposal: Make senior-executive pay a matter of shareholder vote. Not the "nonbinding" votes that are all the rage. Make them subject to a real up-or-down vote. Give shareholders power again. Force executives to appear in front of their employers and explain why they deserve the packages they are offered.

Heard something earlier in the week to describe how crazy CEO compensation is. First off, they suffer no punishment for risky behavior that doesn't pay off. They still get their large, bloated compensations. But they do get additional compensation (outsized bonuses) if they behave in risky behavior that does pay off. Pretty sweet set-up.They are like any other employee.

If they screw up, they get fired (or resign under pressure, to save face).

If they do good for the company, they get promoted (or in this case, extra money, because they already have the top position).

Yes, they make good money, but they also do a very important job. Many companies owe their very existence to their CEO (e.g., Apple).

If you can prove that CEOs today aren't worth the money they get, please do so.

Elliot Spitzer writes...
I have NO problem with his using prostitutes.
I think there should be more of them, actually.

But while he was using them, he was prosecuting them and their customers.

He has no credibility. He is a hypocrite, a liar, and a goat.

If he wrote an article about how he was wrong to prosecute consenting adults engaged in victimless (mala prohibita) crimes, and how he thinks the laws could be changed to make it legal; then he would have credibility on that topic. It would be honest.

But no, what you have is a sleazy greasy lying lawyer, who is shopping his essays around because he is out of a job.

He has no credibility. He is a hypocrite, a liar, and a goat.Does this surprise you? The more someone zealously tries to ban something, the more he likely desires it. Not to mention, "honest politician" is an oxymoron.

Clawbacks (http://www.nytimes.com/2009/02/22/business/22pay.html?_r=1&hp) After Losses, a Move to Reclaim Executives’ Pay
The shareholders are revolting.
The seven troubled companies whose executives received almost $500 million in performance pay since 2005 are the American International Group, Bear Stearns, Citigroup, Countrywide Financial, Lehman Brothers, Merrill Lynch and Washington Mutual. Equilar, a compensation research firm, conducted the analysis of executive pay and earnings at these and other companies for The Times.

Analysts say that 2005 is a useful milestone because dubious lending started sweeping across the nation that year, and toxic assets began piling up at banks and other firms.

MANY of the chief executives who oversaw troubled financial institutions have exited the scene. And several of the companies that Equilar studied are no longer independent. Merrill, Countrywide, Bear Stearns and Washington Mutual have been absorbed by competitors, while Lehman collapsed.

Trying to get out in front of the compensation backlash, some executives are refusing bonuses and limiting their salaries. Vikram S. Pandit, Citigroup’s C.E.O., recently said he would take a salary of $1 and would receive no bonuses until his troubled bank turned a profit. He has not received any performance pay since he took over the top job at Citigroup late in 2007.

The shareholders are revolting.That rebuts your own argument that we need to "cure this madness," since you can see that the shareholders can fire bad CEOs, just as any boss can fire a bad employee.

Who am I saying is the "we"? I don't think I've said. I definitely think the madness of CEO compensation needs attending to. But it can probably be done by shareholders insisting on having control over the compensation consultants and making sure that there are no invested interests there. And they need to figure out how to not reward executives for indulging in risky and fradulent behavior like the companies here did. Or be able to "clawback" those rewards when the truth is uncovered.

Maybe bonuses should be vested slowly, sort of like they do with stock options for employees. In other words, you can have a million dollar bonus from this year at the end of 5 years but it's based on the worth of company. So if the company goes bankrupt before 5 years, the bonus is 0. If it holds steady or increases, they get the full million. Something like that should keep them a little more focused on the future versus the immediate return they could get by over-leveraging the company or trying to hide toxic assets. Hopefully any shenanigans would be uncovered before the bonus is released.

I definitely think the madness of CEO compensation needs attending to.You still haven't proven that there is any madness. Just because a handful of CEOs did bad things, doesn't mean that the many thousands of others (who didn't do bad things) should be punished.

Many CEOs are well worth their compensation. In fact, there are far more incompetent overpaid plumbers and government employees than there are incompetent overpaid CEOs. Shall we form a committee to regulate their wages too?

You obviously aren't interested in hearing anything that suggests that all CEO's are not worth the millions they get paid, so arguing with you is fruitless. It's obvious you didn't absorb anything from the article I posted. You keep asking for proof, I keep posting it.

And if the government is bailing out your company, then IMHO CEO's (and other executives) get the government to regulate their compensation.

You obviously aren't interested in hearing anything that suggests that all CEO's are not worth the millions they get paid,How can you possibly say that, when you haven't even made any cogent argument that they aren't worth their pay (as a whole, not a few cherry-picked examples).

Your arguments all start with the assumption that they aren't worth it. I'm simply asking you to prove that assumption first.

In the other thread I even went further and disproved your assumption as to Steve Jobs, showing you how he was a bargain despite his enormous compensation.It's obvious you didn't absorb anything from the article I posted. You keep asking for proof, I keep posting it.I looked at your link. It doesn't prove that CEOs aren't worth their pay. Like your replies, it assumes they aren't worth their pay and then rambles on about salary caps because oh, someone who makes $500K+ a year can't possibly be doing anything important enough to merit such money. :rolleyes:

Prove it.