April 24, 2006
Exhorbitant Salaries
From American Spectator's blog...
- As a matter of government interest, exhorbitant salaries should be off limits. But I see nothing wrong with jawboning these execs. A $400 million golden parachute, as with the Exxon exec, is obscene. In fact, there is plenty of merit in the complaint that American corporate execs get paid so much more than do, say, Japanese ones. The compensation structure is all screwed up. In fact, the DESIRE for wealth over and above a certain point, except to do good with it (charity, etc), is a character flaw and deserving of ostracism. There's a difference between ambition and greed, and when execs get too greedy they open up a can of worms because it gives the libs a perfect target to get government involved in all kinds of mischief to correct the "imbalances" in compensation. OF course, government should NOT step in, but that doesn't mean the greed is morally defensible.
Amen.
What can a government due? Only "progressive" taxation.... if a board of directors colludes to pay executives these kinds of figures, the only real recourse would be to remove the board of directors, but that's a shareholders responsibility.... not the governments.
Oh, and anyone that's worth $400 million dollars can probably figure out that they shouldn't pay themselves that much.
Economics and Markets Posted by AlexC at April 24, 2006 7:39 PM
So, just hypothetically, if a CEO candidate negotiates a salary and benefits package that would pay him 100,000 per year, full medical and dental for himself and his family, and one hundredth of one percent of the profit the company makes during his tenure as CEO to be paid at retirement, then the company earns $4 trillion over 10 years under his leadership, is it "exhorbitant" "greedy" "imbalanced" and "morally indefensible" if the company actually makes good on the contract and pays him $400 million at retirement? Just curious.
How many CEOs make this deal and wind up with diddly? And how many boards of directors make this deal only to see their company's profits soar?
Q: How much money is "obscene?"
Posted by: johngalt at April 25, 2006 2:17 AMA: I can't describe it, but I know it when I see it!
AlexC, I have to ask you to reconsider your "Amen." I heartily object to pretty much everything that he says.
"The compensation structure is all screwed up. In fact, the DESIRE for wealth over and above a certain point, except to do good with it (charity, etc), is a character flaw and deserving of ostracism." If the desire for wealth is an invalid motivating factor, I suspect we'll have to institute Marxism. Something has to drive decisions, if it is not profit and wealth creation, what is it?
I used to joke that Bill Gates should have been happy with $640,000 a year (that's an arcane technical joke). But -- seriously -- his desire for more, more, more, drove down the cost of computing and changed the world. A CEO is paid on the growth of the assets under his watch. I don't get these guys who get a big retirement bonus for failure, but the XOM folks are not complaining about the rise in share price.
Posted by: jk at April 25, 2006 10:20 AM | What do you think? [2]