Pay Peanuts Get Monkeys

Before joining shareholder activists and lynch mobs calling for CEOs to be held accountable and stripped of their obvious excesses, it’s worth pausing to think about why those perks existed in the first place. From the corporate jet to the golden handshake, they were designed with the intention of making CROSS maximise shareholder profits. If it appears excessive and undeserved, also remember that it might not be the case that you really could do that. ~ Fisman and Sullivan, 2013

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One thought on “Pay Peanuts Get Monkeys

  1. Contemporary CEO’s are a volatile commodity. They are, or their positions are, inherently unstable. A CEO exists to do two things: return value (usually as determined by shareholders or stake holders) and to maintain and grow confidence in the company. These are very demanding and intangible requirements. But, they are so related to the manifest performance of the company the CEO leads. As goes the company, usually, so goes the CEO. Contracts are written with CEO’s to reward them if the company does well. When companies are wooing a CEO with a reputation the CEO has some leverage and, because he or she knows the Key Principle, they ensure they have an appropriate parachute. The Key Principle is this: “You can not please everybody all the time.” CEO’s know that in today’s world of shareholders and stakeholders, eventually they will fall victim to somebody’s dissatisfaction. It is not a question of “if”, it is only a question of “when”. Because a single somebody has to be at the helm of any ship, CEO’s get more credit than they probably deserve when things go right and more blame than they probably deserve when things go wrong. But, shareholders and stakeholders demand that they have someone to put the wreath on as “victor” and someone to crucify as the “spoiler”. Accountability and Liability. These are the reasons the CEO’s get the Salaries and the Perks. I agree that someone should ask the question, “When is enough, enough?” But, can we really blame a CEO for taking what people are will to give him or her? People in the position to give give because it meets their needs.

    Consider a professional athlete or a rock star. Does what they produce have that much intrinsic worth? They make big bucks because they make other people rich. In the process, the individual sports or music fan pays the freight. But, for a time at least, they are happy. In the end, highly paid CEO’s make other people rich (and are worth the investment in them) or they crash and burn. Oh, and don’t think those rock stars, long out of the spotlight, aren’t making money after the fact on the rights they negotiated to residuals while they were on top. They too were smart enough to negotiate a parachute.

    Not making a judgment on the rightness or wrongness of anything, just making an observation.

    Regards, Dr. Ed

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