All CEO’s are Crooks
March 26, 2009
The failed bankers on Wall Street have been whining that if they have to cut bonuses and salaries dramatically, they’ll be unable to recruit great talent, and they need great talent to fix the situation.
And for years, boards have been claiming that they need to pay CEOs $50,000,000 salaries in order to recruit the very best for their companies.
Jamie Dimon at Chase said, “It’s possible someone’s going to walk in my office and say, Jamie, I have a family. I can’t afford to live that way.”
This, of course, is nonsense.
Seth Godin, author of “All Marketers are Liars”, wrote this week about the myth of big salaries for executives in corporate America. Seth makes the case that there’s a disconnect between what executives are paid and the value that they bring to the company. He thinks the reason they’re paid so much is that the market for CEO pay is artificially high because corporations and their boards are trying to attract and keep talented executives simply by offering more money than the competition offers. Seth argues there are ways to market these top jobs other than just throwing more money at them.
Are These CEO’s Crooks?
So are CEO’s that accept these enormous salaries stealing from the shareholders? No, I don’t think all CEO’s are crooks; my title’s just a play on Seth’s “All Marketers are Liars” book title. I think that the talent and time required to manage these huge businesses to profitability should be rewarded and I can’t blame the CEO’s; if companies are willing to pay that much I can’t fault them for accepting it.
I think it’s pretty standard that most salaries in many public companies are governed by a pretty strict process that entails researching the market and paying employees just enough to be competitive in the market.
What’s the Solution?
So even if the market for CEO pay is hugely over-inflated, what can company boards do to keep and attract talented leaders other than pay the price? I don’t know the answer to that but I do know that given the current economic meltdown shareholders are much less likely to be forgiving of watching their stock value plunge while CEOs continue to earn millions.
I don’t think government caps on CEO pay are a good idea but if companies don’t start making changes on their own the government may start taking matters into their own hands. I think it would be wise of corporate boards to reform corporate pay policies themselves so that politicians don’t try and force “one size fits all” regulations on them. What do you think?
All posts by Ben Edwards