Steve Jobs famously took $1 in salary and earned the rest of his money the old fashioned way: He got stock options based on performance. Let's contrast this with the latest parade of rich, overpaid CEOs who have been paid millions as they were shown the door.
The practice known as the golden parachute is common in executive circles. No matter how poorly you perform, or even if you leave the company in disgrace, you still get a nice parting gift for your trouble -- to the tune of millions of dollars.
Next up was Apotheker, fired by HP's board, who reportedly took down more than $13 million after serving as CEO for all of 10 months.
It's not clear what HP will be giving laid-off employees, but you can be sure it will be nothing in line with what these overpriced CEOs got. What's more, imagine if HP could have taken that money spent on failed executives and actually invested it in the business. Over $80 million is not an insignificant sum, even for a company as large as HP.
Not to pick on HP, though. It's just one company in a long line paying off millionaire executives for their incompetence.
The thing I always loved about the Jobs salary story, is the idea that you pay for what is actually produced -- a principle sadly lacking in high-paying jobs, whether in sports or high technology.
Regardless, the job of any CEO at a publicly traded company is to protect and grow the company stock price. It's one of the reasons that Apotheker was given such a short leash. The stock was tanking on his watch. But if that's the job, then paying these folks for failing is a sick and twisted notion.
If you fail and you're let go, you should do what Thompson reportedly did: Pay back salary because you let the company down and you didn't successfully meet the conditions of your job description. In what universe does the person who didn't do the job get generously rewarded for it? Only in American CEO circles, apparently.
The whole idea of a golden parachute is just wrong. It's time we treated failure with a correct response and let these unsuccessful CEOs walk away without a penny more. They may get to keep what they earned, but they absolutely shouldn't get to take extra. It's a practice that needs to stop. It's not good for the industry and it doesn't make any sense.
rdv, intersting example... but it's a tiny fraction of corporations whose shareholders actually vote against exec pay increases.
Perhaps more crowdfunded ventures will have more egalitarian pay scales? Or future companies will have more competition in general and be smaller than these giant dinosaur enterprises -- and employee pay will be more evenly distributed?
Alternatively, a flood of new business formation that spreads the revenue more widely. With each new business comes a set of C-level execs, COO, CIO, CMO, and of course CEO.
The tepid level of new business formation keeps the very top jobs to a very few and limits potential competitors in each marketplace.
It used to be a CEO was not some Global Potentate, but a guy who was rather lucky and somewhat cunning enough to climb up 100 other guys backs and reach the top. For his efforts, he got to wear a better suit and drive a Lincoln Continental instead of a Chevy, and have a house in Connecticut.
Now those things would be sneezed at by today's gazillionaires. But there used to be a lot more of the old CEOs.
Adding to what Ron_Miller said about "shareholders putting thier foot down", again we can cite the example of Vikram Pandit who was denied an increase in the pay package to $15 million in April 2012, showing the power of shareholders... Check this
He took a salary of $1 from 2009 till 2011. In 2011 he was awarded $23.2 million as retention bonus($16.5 million in stocks and options and $6.65 in cash).. Here is a article from New York times covering the topic Click here.
You're right. There is clearly a supply and demand issue here and as long as that happens, things are unlikely to change. Perhaps if strong shareholders put their foot down, but don't see that happening either. After all, we've seen this play out over and over and little has changed.
You're right of course. I don't even expect it to change. It's embedded in CEO culture. It would take a wholesale revolution on the part of boards and since boards are usually filled by current and former chief executives, I don't have a lot of hope that the mentality will shift any time soon.
I hadn't heard that one, but I would be curious if the CitiBank CEO got bonuses or other salary during that time in spite of the poor performance as is often the case at large high tech companies.
The only way for the golden parachute practice to be abolished would be if there were suddenly a flood of qualified CEOs in the market, reducing the leverage that they have in negotiating these contracts.
A flood of good CEOs is unlikely to happen, though. There is simply a scarcity of connections, talent and experience.... which is difficult to avoid.
The difficulty lies in standardizing the placing of performance conditions on pay. If one enterprise starts doing it, executives will just take jobs elsewhere.
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These days, even some usually techno-friendly people have their hackles up about the potential of Google Glass to surreptitiously record video or take pictures. I've heard more than one tech savvy friend bring up "the creep factor," the ability of a weird guy to secretly record you.
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