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Post by blueneck on Aug 2, 2007 6:41:29 GMT -6
From the Center for Corporate Policy site , a great article refuting the lame and outright false talking points that overbloated CEO's and their apologists use to justify their obscene paychecks www.corporatepolicy.org/pdf/CEO_Pay_Point_Counterpoint.pdfI especially note the part about how even Financier/Robber Baron JP Morgan who believed that executives should not make more than 20:1 over the average (current ratio is 411 to 1) as any more than that can sap morale and producticity, Harvard studies and trade magazine polling also supports Morgan's positon.
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Post by unlawflcombatnt on Aug 3, 2007 0:59:18 GMT -6
This was certainly an interesting article. There were some justifications for increased CEO pay that were completely debunked.
*Executives are making more because corporations are bigger, especially during the rapid growth period from 1980 to the present.
"David Wessel pointed out in the Wall Street Journal, U.S. companies also experienced tremendous growth from the 1940s through the 1970s, but CEO pay during that period didn’t rise much faster than worker pay. By contrast, today’s CEO-worker pay gap stands at 411-to-1, compared to only 42-to-1 in 1980....
Moreover, much of the growth in firm size during the past two and a half decades was due to mergers that, according to Miami University professor James Brock, have had dismal results in terms of efficiency. Brock points out that the estimated $20 trillion spent “shuffling paper ownership shares for existing facilities and firms” could have been invested in developing new products, production methods, and plants equipped with state-of-the-art technologies.”....
*Out of Control Options
The biggest component of compensation is stock options, which are often touted as a way to align the interests of managers and shareholders. In reality, options allow CEOs to reap massive payouts from short-term stock spikes or industry-wide movements – even if their own company’s performance is poor. They can also drive executives to “cook the books” or take other actions that boost short-term share prices at the expense of long-term returns.
As former SEC Chair Arthur Levitt, Jr. put it, “these compensation packages set up a system in which executives have, I believe, the wrong incentives. Too often they are managing the numbers for short-term gain and personal payout and not managing the business for long-term growth and shareholder value.” Options have also been widely abused. The SEC is investigating more than 100 companies for options backdating -- retroactively setting the price of an option at an earlier date to maximize the executive’s unearned profits, at shareholder expense....
*CEOs still have enormous power to hand-pick their directors.....
Once selected, few of them want to risk losing their coveted slots by questioning excessive executive pay.....
*Compensation Consultants Aim to Please
Corporate boards often hire compensation consultants to help justify high executive pay packages through peer surveys. To keep their customers happy, these consultants have an incentive to skew their research....The business model of being a compensation consultant is based on satisfying the interests of the people about whom they’re supposed to be making that independent judgment.”....
*In a multi-trillion-dollar economy, what CEOs are earning amounts to a mere pittance....
That argument has been effectively rebutted by two Harvard University researchers who looked at a large set of public firms and found that the compensation paid to their top five executives was hardly pocket change. During the period 2001 to 2003, the earnings of the top five executives at these firms amounted to nearly 10% of corporate earnings. And that was almost double what it was during that period 1993 to 1995...."
CEO pay is not going up because of their "increased skills" or their being in "increased demand." CEO pay is increasing due to greed, manipulation, connivery, and outright fraud.
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