You mean like when KMart CEO Chuck Conaway files for bankruptcy, lays of 22,000 workers with $0 in severance pay but gets $9 million in a bonus? Or when George Sheehan runs webvan into the ground but quits months before the company dies and arranges for a severance package that pays him $375,000 for the rest of his life (which, granted, he won’t see from a dead company)? Or Jill Barrad who is at the helm when Mattel’s stock loses 70% of its value, but she gets a $10 million bonus?
Given the nature of executive compensation today, is there anyway for these people to not make out like bandits? I wouldn’t know, because from the perspecitive of a twerp in a cube, it looks like even the colossal fuck-ups still find a way to make millions.
Fun fact o’ the day: I found out that if you pro-rate A. Rod’s salary, he makes roughly the same amount per at bat that I make in a year.
A-Rod has a much stronger case that he deserves his salary than your general $X million bonus getting CEO, simply because his salary was negotiated by the free market.
A lot of these CEOs are getting paid by their cronies and shit like that, a bit underhanded at times. Athletes and actors are getting market value. If you could make the Texas Rangers what they think A-Rod can make the Texas Rangers, maybe they’ll give you $25 million a year.
There are a lot more people with brains then those that can hit a 100MPH Randy Johnson fastball 450 feet.[/quote]
Tell that to the seagull.
Sure there are, and that’s why there’s a lot of smart people who don’t make as much money, including the Take Two executives folks are complaining about. But to the extent someone is both smart, and has the drive to be a CEO of a successful public company that returns great value to its owners, er, I don’t really see what could upset anyone. Especially when actors like Tom Cruise, who aren’t even good at their chosen profession, make 100 million+ a year.
Agree with Ben that athletes or artists are not the same as managers because they only get paid for whatever “products” they actually deliver to their “customers”, no matter how trivial those products might be. If you think some baseball star gets paid too much you can simply elect not to watch his games, not to buy the sportswear he advertises, etc. For all the money he makes, nobody’s taken that money away from you against your will, nor from anyone else – the star provides his own product, and you can buy it or not.
The situation with managers (who haven’t invested capital in their company) is different because it’s frequently unclear how much, if anything, they actually contribute to any shipped products or to the company’s bottom line. Their compensation is ultimately paid for by those who certifiably do create and buy the company’s products, but these people have no say in setting the managers’ salary – whereas the managers can set the salary of other employees at will, or even fire them while simultaneously raising their own compensation.
Someone might say that “the market” sets the manager’s salary but that’s obviously bullshit because CEOs of failed companies routinely receive extremely generous compensation payments. What market force that rewards failure is supposed to be at work here? The truth is that management salaries are set by a racket, not by the market.
Talking of “jealousy” ignores the fact that management, unlike entertainers, live at the expense of unwilling others who have little choice if they want to make a living in their profession, or buy the products they make. You can’t defend this unless you are ideologically opposed to any kind of economic regulation, and think of a parasitic management caste as an acceptable tradeoff.
It’s really no different from politicians making their own laws to raise their own salaries at the expense of the taxpayer. Parasitic management is capitalism’s new aristocracy, and it should be eliminated as far as possible, just like parasitic government bureaucracy. That’s probably impossible without fundamentally changing the stock market mechanism that allows for the existence of parasitic management in the first place, though (due to lack of control when ownership is widely spread).
I’m not sure if you’re still just talking baseball here, but at least the salaries of corporate officers are generally set by a compensation committee of independent directors, who are elected by the owners of the corporation.
That’s probably impossible without fundamentally changing the stock market mechanism that allows for the existence of parasitic management in the first place, though (due to lack of control when ownership is widely spread).
Actually, widely held corporations are far more likely to responsibly deal with executive compensation, since the directors are more vulnerable to shifts in the mindset of the owners, assuming there’s a decent number of institutional investors (and not just retail investors who are generally unable to have the resources or inclination to organize shareholder votes).[/quote]
I’m not familiar with the American system but if it’s similar to the German Aufsichtsrat mechanism, these independent directors are merely salaried managers at other corporations. Also, who represents the owners? As you said yourself, large packages of shares are typically held by institutional investors which are run by… yet more salaried managers.
Same profession, same social segment – they are not controlled by anyone who isn’t part of this circle. Giving each other inflated salaries is obviously in their mutual best interest, and if a company does fail, or if one manager does have to go, their manager buddies are sure to help them find them another overpaid job. Besides, gigantic severance payments ensure that even the most incompetent manager won’t ever have to work again after running a company into the ground.
So managers systematically shield themselves and each other from the market forces that are supposed to reward success and punish failure. If you have a better explanation why top managers routinely get several millions of dollars after being fired for incompetence I’d love to hear it. That sure doesn’t sound like a working market or other control mechanism to me – instead it sounds exactly like politicians drawing huge pensions after sitting in parliament for five minutes.
But to the extent someone is both smart, and has the drive to be a CEO of a successful public company that returns great value to its owners, er, I don’t really see what could upset anyone.
I agree. Whether it’s worth $2 million or whatever isn’t the point. Take 2 had a great year in a bad overall year.
Take any company, shoot their CEO, and don’t let them replace him/her. The company may survive, but it’s going to flounder. Look at the turnaround Lee Iacocca did for Chrysler. Look at the impact Steve Jobs had on Apple. Even in non-dramatic ways, the CEO adds to the company, maybe not by developing a particular product, but by making sure the company has a product. Leadership is like air, you can’t see it, but you know when it’s not there. While I share your disappointment that CEO of failing companies get lavish compensation, I’m not ready to generalize that it’s all a racket. After all, if a retail CEO makes the tough, unpopular decision to close stores that are losing the company a combined $50 million/year, shouldn’t he get some compensation?
Saying that management “live at the expense of unwilling others” ignores the fact that you can simply not buy a company’s products. No one held a gun to your head to buy GTA3 from Take2. No one can force me to wear Nikes. Not once have goons showed up at anyone’s door and kidnapped them to make them shop at Wal-Mart. And in the modern, industrial world, a worker can change employers. Even in a depressed economy, opportunities exist, perhaps of the worker’s own making.
Maybe I’m not getting something. I don’t see how entertainers are all that different from CEO in the context of compensation. Yes, entertainers are more producers than CEOs, but really, both have a significant influence fo the success of a venture. Entertainers produce. CEOs mange production. Executives see the producers have the marketing department to help sell the product, and the legal department to fend off lawsuits, and the human resource department to make sure the producers get paid, and, sometimes, the vision to stop developing and start producing. George Steinbrenner is as vital to the New York Yankees’ success as Derek Jeter.
Actually, companies are eliminating as much of the management as possible. Woe to the middle manager. But to say that management is parasitic ignores the true benefits of management. If you think that management has no benefits, start your own company without any management. Good luck.
Take any company, shoot their CEO, and don’t let them replace him/her. The company may survive, but it’s going to flounder. Look at the turnaround Lee Iacocca did for Chrysler. Look at the impact Steve Jobs had on Apple. Even in non-dramatic ways, the CEO adds to the company, maybe not by developing a particular product, but by making sure the company has a product. Leadership is like air, you can’t see it, but you know when it’s not there. While I share your disappointment that CEO of failing companies get lavish compensation, I’m not ready to generalize that it’s all a racket. After all, if a retail CEO makes the tough, unpopular decision to close stores that are losing the company a combined $50 million/year, shouldn’t he get some compensation?
Saying that management “live at the expense of unwilling others” ignores the fact that you can simply not buy a company’s products. No one held a gun to your head to buy GTA3 from Take2. No one can force me to wear Nikes. Not once have goons showed up at anyone’s door and kidnapped them to make them shop at Wal-Mart. And in the modern, industrial world, a worker can change employers. Even in a depressed economy, opportunities exist, perhaps of the worker’s own making.
Maybe I’m not getting something. I don’t see how entertainers are all that different from CEO in the context of compensation. Yes, entertainers are more producers than CEOs, but really, both have a significant influence fo the success of a venture. Entertainers produce. CEOs mange production. Executives see the producers have the marketing department to help sell the product, and the legal department to fend off lawsuits, and the human resource department to make sure the producers get paid, and, sometimes, the vision to stop developing and start producing. George Steinbrenner is as vital to the New York Yankees’ success as Derek Jeter.
Actually, companies are eliminating as much of the management as possible. Woe to the middle manager. But to say that management is parasitic ignores the true benefits of management. If you think that management has no benefits, start your own company without any management. Good luck.[/quote]
Then look at what happened after Iacocca starting believing his own press. Chrysler floundered only to be bought by Daimler. I know I preach about this book a fair amount, but it’s made me radically change my thinking about the ways companies are run.
Figure head CEOs with large egos and tight grips on companies may be good in the short term, but for compnies to truly be great and to last you need everyone, not just the execs going in the right direction. In fact their data shows that companies with “larger than life” CEOs fail more often than companies with more laid back and humble CEOs.
It’s amazing that Take 2 managed to get to this point in the first place. I remember their debut in the early 90’s as a bottom-feeder developer. (Remember “Hell: A Cyberpunk Adventure”?)
CEOs are like sports coaches. They just get the job done. With few exceptions, they’re not all that special. A change may bring about a downturn or upswing depending on the chemistry of the new CEO/coach and the company/team, but few top management officials are actually great enough to have a lasting impact.
I remember taking a psych course and getting some interesting reading material. It was only meant as an example of a psych paper, but this study showed that the most ruthless, not the most capable people got higher management positions. As society progressed and things become entrenched, the ruthless take advantage of social conventions, and generation after generation builds up towards ‘greatness’. Most directors, managers, executives are capable and extreme ambitious, but otherwise normal. Then there are the megalomaniacs who, through their own self-confidence and sense of infallibility take advantage of the ‘normal’ execs. Self-confidence sells. The more confident a person is, our instincts tell us, the more likely that he’s a winner - and that’s the horse you bet on. Compounded with a ruthless determination to cement power (which is seen as strength, clarity of vision and more confidence), these people always get ahead. When you have psychos who are blind to their own failings, they’re always the most confident - and that sells them.
OK, this might make more sense if I wasn’t operating on 3 hours of sleep.
