Monday, October 8, 2012
CEO salaries: higher than a kite
Too many corporate directors continue to shower pay and perks on their CEOs, so they say, because they have to pay through the nose "to recruit and retain top talent."
Some researchers asked the obvious question: how many CEOs take a walk to another company because they aren't paid enough?
Answer: it's a real small number.
In fact, the merest handful of corporate CEOs ever take new jobs as CEOs at another company, for any reason. Most CEOs who leave their posts just step down and retire or do something else.
The directors' fear that their CEO will take a hike—like, to a competitor—if money isn't thrown at him/her is simply, well, bogus.
An analysis done last year at the University of Delaware shows that of about 1,800 new CEOs chosen during 1993-2005, less than a couple dozen of them had already been the chief executive at another company.
Nearly all CEOs don't ever take their alleged executive abilities and go to another company, for any reason.
So, the notion that directors have to pay 'em boatloads of money to keep 'em is just a convenient lie to deflect criticism of sky-high executive pay packages.
Here's an interesting exercise: what would the average CEO do differently if his/her pay was cut a little, say a 10% cut or something like that? If he's making $10 million a year, will he start doing a crappy job if his pay is reduced to $9 million?
And here's another interesting exercise: think about your own experience in the workplace, and ask yourself if the bosses you've known were worth every penny they got paid.
Case study: Marissa Mayer
Would they work for less?