Showing posts with label CEO Pay. Show all posts
Showing posts with label CEO Pay. Show all posts

Friday, February 07, 2014

America Is Owed An Explanation

I think America needs an explanation as to why it's so difficult to raise the minimum wage yet incredibly easy to raise the pay of CEOs. Take a look at this recent piece in the LA times about CEO pay.

The great management guru Peter Drucker advised companies to stick to a ratio of about 20 to 1 between the pay of the CEO and that of the average worker. That's "the limit beyond which they cannot go if they don't want resentment and falling morale to hit their companies," Drucker wrote, according to a comment on the CEO pay rule submitted to the SEC by Rick Wartzman, executive director of the Drucker Institute at Claremont Graduate University. Drucker's standard was in line with the ratios of the 1970s and early '80s, when he wrote those words. Today they seem positively quaint. 

The average CEO-to-worker pay ratio in 2012 was about 350 to 1. That's down somewhat from where it was before the 2008 recession, but it would have to come down a great deal more to return to the non-obscene range. It's plain that this ratio typically has little to do with an executive's performance. The CEO-to-average-worker pay ratio of the 250 largest companies in the Standard & Poor's 500 index ranges from 1,795 to 1 (J.C. Penney's Ron Johnson) to 173 to 1 (Agilent Technologies' William Sullivan), according to Bloomberg, which ran the data for 2012. 

My wife used to work for Supervalu. They went through a few CEOs during her tenure there and it was always the same thing. Somebody would be brought in to "fix" the company. They would be paid millions of dollars. They would fail. And then they would leave with their millions, accomplishing nothing, with dozens (if not more) of average workers being laid off. The information in this link details how something similar happened with JC Penney. In so many ways, this is complete bullshit. If the CEO fails to do is or her job or makes it worse, they shouldn't get any amount of money. Take the money you are paying the CEOs and keep the average workers longer.

At least the SEC seems to be doing something about it.

I wholeheartedly support this new rule and think that the public (especially the investing public) needs to be aware of how these companies are doing business. Firms like Penney's don't seem to understand, as Drucker noted above, that the health of a company springs from its employees, not from the top. They aren't going to be successful unless they start paying better wages to everyone. Worse, the social cohesion in our society is fraying as a result. There are a lot of people hurting out there and seeing wealthy people bitch about poor people while they themselves are getting something for nothing is really FUBAR.

The Right likes to scream about "class warfare" but that's really code for desperately wanting to maintain aristocracy.

Tuesday, February 04, 2014

Friday, August 03, 2012