What should a CEO make?
 

We’ve all heard that in the 60’s a typical CEO made about 5 times more than the average employee. Today that number is about 250-350 times.

I can do the math and I know that if I took my CEO’s salary and divided it up equally between each employee, it would only equal $250.

In 40 years is the salary of a typical CEO going to be 500-1000 times that of an average employee? Will that be reasonable? When is enough, enough? Should a CEO make more in one day than an employee does all year?
Should a leaders salary be based on share price? Profits? Revenue?

I only ask because my CEO is making a killing and managers are getting huge bonuses all the while we are losing revenue and market share. All profits are going to stock buybacks, not buying new machinery.

In private industry, a CEO's salary should be set by the board of directors. The Govt. has no right to say a damned thing about it.

In Japan for the longest time a CEO could not make more than 10X the lowest paid worker. If he wanted a big raise everyone got one. The US would be much better off if it implemented something similar into law. Besides who spends more of their paychecks to keep the economy going, the CEO or your average job age earner?

I think recently when I saw the salary of the execs at my company (Fortune 10), the CEO made around $2M/yr salary - and another $18M or so in stock benefits. So at $20M/year - yeah, he's making about 200x the average worker's salary. So every workday, he ONLY makes about 80% of the average employee's yearly salary.

A base salary that is 5 - 10 X lowest hourly rate, bonuses to be x% of stock gains.

Oh I’m not advocating government intervention other than maybe higher taxes. I know the tax wouldn’t make a dent in our deficit but it might be better here than going to his mansion in another country.
After all the sham bankruptcies in 2005-2008. The top always seem to get a golden parachute. While workers lose jobs and retirements. Ship the jobs overseas save $1 on manufacturing and management receive bonuses.

Government should have no say. Board should set salary and bonus package.

As far as base. If the CEO screws up how much will that decision cost the company. If he is correct how much will the company be rewarded by his decision.

Depending on company size I can easily see where the CEO is worth 100x that low on the totem pole employee. Little risk and reward for the bottom of the wage scale with huge risks and reward for the CEO. A quality CEO should be compensated for their ability to minimize those risks while maximizing the reward.

The bonus package should be based on various indicates. They should include, but not limited to, profits, cash flow, cap ex, and sales growth, .

My last CEO made just over $20M a year also.. Thats about $76K a DAY! geez..

How much does an elite basketball player make. Curry is making a half mill a game. 10k per shot when he is really gunning away.

It is not just a CEO making outrageous money.

It could perhaps be argued that those companies defrauded the government by making it pick up lost pension and comp liabilities, the private investors who were shorted out of a system which is supposed to distribute profits fairly but has a mandate to gain profit, the board was involved with insider trading and self-dealing, and the taxpayers who lost a ton of local jobs which stimulated the economy, and the company was subsidized by government.

But then again it's a 'private' system.

I believe the CEO of Lincoln Electric (welder MFG) made 3x the lowest employee.

I admire that.

CEO salary is supposedly inverse of company performance - according to some smart folks.

The issue? Weak stupid boards. The BOD is in control and they are afraid to act.

You don't need to pay 20MM to run a company.

It pisses me off when you see what their priorities are ME ME ME. And they get paid a great bonus and told what a great guy they are just to F' off.

Another thing too is, companies that are up and running, nothing changes, why the huge pay. They don't do much other than eat lunch with other fat pricks.

I like the sound of the Lincoln Electric guy.

What was Steve Jobs worth to Apple?

What was McGuire worth to United Healthcare?

From Wikipedia
When McGuire joined United, it was an unprofitable regional health maintenance organization with annual revenues around $400 million.[3] When he left, United was one of the largest, most profitable, and most diversified healthcare companies in the world, with more than $70 billion in annual revenues, more than 50,000 employees, and more than sixty million health plan members.

Some other posts make good points.

- Why should the government decide on a CEO's salary? It is the Board of Directors job to make those kinds of decisions
- Big companies, big salaries
- Compare CEO salaries to sports figures or other celebrities.

The opening post was another attempt to promote class hatred...divide and conquer, soak the rich. I fail to see how reducing a CEO's compensation helps the little guy one iota.

But hey, let's hate the rich...just because.

Anything other than "it's worth what the market will pay" would require a monumental culture shift, and to what?
A better question would be at what point does compensation become surreal to the point of being sort of offensive, because the offended doesn't make that rare atmosphere. That's a shifting target of course.
Mbtarga's example above seems reasonable to me, 2 Mil per year salary is not ridiculous, and bonus based on company performance, ie stocks etc, is huge in that example, but that's down to negotiations with the board, and what you can do with the company.

This.

How is it that politicians become multi-millionaires on a low 6-fig salary? (rhetorical)

oh, right.. they suddenly become rich authors. :rolleyes: coughMoneyLaunderingcough

Not quite correct. We are rich, we just hate some other rich.

Company profit

But again none of you .genius's can answer why? Hint it is not a Board phenemonen.

This.

The part I love is how CEOs get passed from company to company running off the rails everywhere they go. You'd never know in reading their applications or CVs. I once had a CEO tell me 5 years is a great run as CEO. It was my observation that he had 2 years of getting the benefit of the doubt as he was "new" (despite the press release calling him a proven leader) a couple as an absent CEO of a failing organization then another before finally being found as a liar and addict...which explained his tremor from day 1.

The guy only valued "alignment" (aka blind loyalty) and perpetuation of perception as everything culture courtesy of the Studer Group headed by a delusional, recovering alcoholic, cult leader.

At the role out of the organization's affiliation with Studer Group, "leadership" had actual glasses of Kool-Aid lined up that they insisted people drink. I wouldn't believe it if I hadn't been there. Jim Jones would have been proud--but he used Flavor aid.

Not as a stand alone metric. Same goes for stock price. Terrible stand alone measure of actual long term goals.

Cut cap ex. Cut R&D. Sell off assets. And the current bottom line grows while the future is decimated.

I lived in that world as a peon....

CEOs that were "good" or great....compensated at a level that few here can even relate to. One's that truly sucked and destroyed VERY profitable 100 yr old entities....10x that :(.

Don't blame the China trade on anyone but "corporate b$"

No CEO should earn nearly 100 million in a single year...when they suck....

Let me load the BOD with my "pals" ....they'll decide what "we" are all worth....sweet deal.

IBM, mega-banking (2), Big Tobacco....those were my gigs and I watched them "$oar" since the late 80s...

Jobs & Curry....are worth it.

Most aren't....jmho.

My last CEO outsourced an IT dept in '08....her salaried was doubled to 15 million in '09....she's rich and retired....corp is ancient history now....foreign owned.

Greed is good....if yer greedy :(

Investors put a premium on profits. Businesses hire CEO's that make the business appear profitable. Businesses no longer put value in good workers but they'll pay a CEO to keep worker pay low and extract as much work from each worker for the money paid, and if the CEO runs the business into the ground... they get a huge buyout on their way out the door.
As a small business owner I hold no animosity towards people making large sums of money... it would just be nice to see them actually EARN that money.

I am a fan of pay for performance regardless if you are hourly or salaried . You get a competitive base pay package based on similar companies/industries . Hopefully health insurance then load up performance incentives . Make some incentives a little easier to achieve with the balance harder to achieve . If employees are given the tools to succeed , an environment that challenges them to perform and think outside the box many will over achieve . Some will just be happy plodding along but still being productive . And some will be under performers that can barely pick the low hanging fruit .

^^^ Will starting all these "workers" at say a hundred bucks an hour work ;)?

'Cause it doesn't seem to work that way for CEOs :(.

The BOD are in the same club (sometimes literally in the same country club) as their buddies whom the supposedly pay on merit. How much do you think assembly line workers would be paid if they set each other’s salaries?

I have to agree, the board of directors needs to decide. The government has nothing to say about it. The government is just the beneficiary of the free enterprise system, and rakes in the taxes. It is crazy how much some CEOs make, but not much different than sports stars or movie stars.

Gotta love this class warfare stuff. A CEO should make as much as he or she can. Period. Same goes for everybody else in this country. It's not a zero sum game - I can make as much or as little as I am capable of, and that is wholly independent of how much or little you make. My only constraint is competition. For the class warfare pinheads, can I get to tell you how much you should make? If you don't like what you are earning, crawl out of your little cubical and do something about it; go somewhere else, or do something else and make more money. Don't decry others making whatever they earn. If they are incompetent, they'll flus h out; they always do. And if you are worried about being part of that flush - MOVE. Don't be a stupid, whiney schmuck who sits back and always says I could've done this or that but for what someone else did to me.

Bingo.


Yeah right. In Japan you get arrested and don't get out of jail until your trial.....if then. The average employee works 60 hours a week and lives in a 750 square foot apartment. They're lucky of they can afford a car. They forego sex and family and suicide is rampant.

You get what you pay for.

I have no problem with anyone making as much as they can I'm just not a fan of handing over a boat load of cash to ANYONE that hasn't proven themselves . That's why I like pay for performance . You want to make a boat load of money ? Here are the incentives you need to hit . I would dare say that if pay for performance was in place at Sears Mr. Lambert would have left long ago and maybe ....... just maybe Sears would be in better shape .

Same thing for an athlete or a performer or an actor , if you can perform and achieve specific goals then you make $$$ . An example would be ANY hit TV show . The actors/actresses " usually " don't start out making one million dollars per episode . The series has to build and as fan base grows so do salaries . It's not for me to say an actor or actress is worth one million per episode , if that what the market can stand then so be it .

I worked for 26 years at the nations largest defense contractor and my performance reviews were stellar . It was very rare I didn't get a raise every year . I worked my butt off and made a lot more money than many college grads . I only have a HS diploma . Bottom line make as much as you can ............ just earn it .

What should a CEO make?
 

Decisions.
Everything else is none of your business. He or she earns whatever they negotiated and we shouldn't be haters because they may make more than us.

This is the key. A CEO is the equivalent to a NFL quarterback or MLB pitcher.

I can tell you, there is an exodus of player base going on right now.

Player base that has paid monthly subscription for YEARS.

https://kotaku.com/with-activisions-influence-growing-blizzard-is-cutting-1831263741

The stock value is reflecting that.

If those people find other games to subscribe to, that income is lost forever.

By CEO's not understanding the difference between milking cows and butchering cows you can tank a company quite quickly.

Activision is butchering the cows of its acquisition of Blizzard.

On the other hand, I have seen new CEO's really turn things around and find a a good direction.

There are lots of pot holes people with business educations are falling into right now, especially in the entertainment industry.

They went to exclusive schools surrounded by other people taught within the same limited environment. They believe they know everything, yet entertainment is about getting in touch with people at their base.

I have seen twitter messages from high level entertainment execs where they insult their customer base. Brilliant!

Customer service, bug fixes, testing to avoid the need for bug fixes, time lines that allow problem solving in advance, keeping the dev team hired after to solve problems that may have gotten released; these are important things.

Look at Star Wars and the performance of some of their latest releases. Corporate windbags completely out of touch with reality trying to dictate changes to what was a successful franchise.

So what should they make? I believe we'd be better off if as investors we set metrics that took in a longer term result than just riding the ups of good times.

Short term rewards are pursued far too often, with long term destructive results.

But like others, this is for the the investors to decide.

vvv Perfect.

I have owned two companies since I retired from the Navy 10 years ago. I have sold one and still own a major stake in the other...working on a third. I like to work.

Different business models, different products, different corporate structures, different compensation that all has to be husbanded and managed. I have called a few folks here for advice which was greatly appreciated.

I really wonder how many here understand the true differences between an S Corp, C Corp, LLC, Holding Company, etc.; corporate roles and responsibilities...what it takes to prepare to sell a company, the needs of investors, shareholders.

I think a company should have the right to pay it's management anything it pleases.

However, if I had a say in things, I would cap the payroll deduction on income taxes to no more than $100,000 per any individual employee. I do not think that the government (us) should be subsidizing million dollar salaries. I also think that the social security deduction for both employee and employer should not have a cap. If you make a lot of money, you simply have to contribute more to the fund.

This issue hits a LOT of buttons for me. I work for a financial company that has about 50,000 employees. The CEO salary is about $1 million...which is probably average, especially by industry standards. Stock options brings his total compensation to somewhere between $15 - $20 million annually, where the average salary across the company is maybe $40k- 50K (CEO pay is about 500x the average worker). The CEO (and exec team) gets huge annual bonuses, while the average worker gets, maybe 1.5% annual raise (plus a token bonus).

Let's look at the issue another way...for those who say, pay reflects what the market will bear. What happens when the CEO causes a financial calamity?...either for the company or for the economy...gee, what happened to Mozilo, or Ken Lewis or John Stumpf? Mozilo could be credited with being a major cause of the 2008 financial melt down...did he serve any jail time? Any fines these people paid amounted to pocket change - the amount does not matter because they came out still RICH!

What about the thousands of consumers who lost their homes? The risk reward relationship is skewed far too much in favor of the CEO. Kozlowski went to jail for 6.5 years, Martha Stewart served time for - obstruction...anybody else do that recently?

Today it seems rare that the BOD acts in the best interests of the s/h. The BOD is a rubber stamp that acts based on information provided by management (gee, is that information unbiased?). CEO compensation, in many cases, reflects unbridled greed. Greed that has, in the last 30 years resulted in the erosion of the middle class while the rich get filthy. This is not an issue of class warfare, it is an issue of theft by deception.

But hey the market will fix it all, right? Oh wait, perhaps the markets are not totally efficient and effective? Gee, I wonder why?

Take a risk, put ypur own money on the line, and start your own business. You can then set whichever standards you wish.

Many of us have done so.

I worked at a job since I was a junior in high school. I just received a paycheck, and occasional bonus. It was comfortable to know what my paycheck was going to cover, and relax. Then because of many factors mostly digital photography, my industry changed at the core. I had to adapt. The industry changed again, and a few years ago I started my own company with a business partner.

I invested my own money into new aerial digital camera systems, and a ton of computers, and now a Cessna 182T. The government was more than happy to accept the taxes we had to cough up. Lots of taxes. No government help to find clients, and help us work on weekends and late nights for no money, trying to build the business.

Now we are having some limited success, and I see tax bills that are just insane. Just part of making money and having our Uncle Sam as a very expensive burden to support. We will pay our CPA a lot of money to find all the ways possible to keep as much of our money as possible for ourselves. Our partner Uncle just keeps sticking his hand in our pockets.

I could have just relaxed, taken SS retirement and started sucking on the government tit that I have been paying for since I was 16. Instead I started a business so I can pay more in taxes.

Here is the deal.

Imagine the average employee had their salary lowered to 5% of their present level. Then, hopefully, 95% of what is now their existing salary will come from stock options rather than guaranteed income.

What portion would take that offer?

Say you make $100K year. You now make $5,000 a year salary.

Most people do not have the sort of risk tolerance to accept that, and without the willingness to step further, you will stay where you are.