Re: [MLUG - DISCUSSION] too much is too much for our richest CEOs

[Stephen Montgomery-Smith <EMAIL:PROTECTED>]

Jonathan King wrote:
> On 1/5/07, Vern Green <EMAIL:PROTECTED> wrote:
>
> > I am not sure I totally agree with you but I think I do.
> >
> > The point here is these compensation packages are put together by 
> > those very
> > people who are firing him. I am sure they go through a lot of 
> > negotiation to
> > get to that point with a good portion of the buyout negotiation taking 
> > place
> > before a contract is accepted.
> >
> > Of course the person claiming to be "aghast" is not one of those 
> > making that
> > decision.
>
>
> Indeed, and that's the whole point. As a stockholder, you have
> remarkably little influence on these kinds of decisions, which are
> generally made by a "Compensation Committee" whose members are
> generally members of the Board of Directors. Stockholders vote for the
> Board, of course, but they generally can only vote for people put
> forward by a "Nominating Committee" whose members are usually...wait
> for it...drawn from the Board of Directors. Members of the Board of
> Directors are very often high executives and CEOs of other companies
> plus influential retired politicians and maybe some other people
> chosen to make it seem like the whole thing isn't an inside job.
>
> It's really a problem, and a self-perpetuating one. Shareholders have
> every right to be completely pissed off that they lost $450 million by
> hiring this guy. If a company managed to drop that kind of cash doing
> something careless or "strategic" or whatever, heads would roll. But
> because it's just executive compensation, why, that's just the cost of
> doing business.
>
> Bollocks. Companies performed just fine back in the day when a CEO was
> lucky to get only 100 times the average salary of the average worker
> in the firm, not to mention when the multiple was even lower than
> that. Every big company has a CEO, and they last an average of
> something like six years at the top (they lasted much longer in the
> old days, interestingly). Pretty much every CEO was a CEO or high
> executive of a large company, so it's pretty clear that, for the S&P
> 500 companies, we're "producing" 80 of these guys every year with no
> problem, and several hundred other people just as qualified who get
> paid big salaries as executive VP of X. Executive talent is not that
> rare on the ground, so the compensation packages are as high as they
> are only because the market for such talent is non-competitive, with
> salaries being set by the very people who are applying for these jobs.
>
> This is, of course, just cronyism.

I think that your last sentence is the crux of the problem.

If Home Depot made an honest mistake, and hired someone who they thought 
was good, and at a competitive rate required to acquire this person, and 
it just turned out that his management style didn't work out, then I see 
this as a forgivable mistake.  I have no a priori reasoning that anyone 
shouldn't earn this much.

But if there was some negligent incompetence or cronyism in these 
decisions, then I am really annoyed.  I think in part I am annoyed 
because I see this happening at MU, albeit the high salaries aren't 
quite so high.

Stephen

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