To me it seems like the fundamentals at work here resembles what made the Soviet Union weak in the end. Just substiture CEO's for party bosses and bureaucrats, and the forces looks more or less the same.

Having said that most people still have a fundamental reason for having a job and keeping it in order to stay financially afloat. But the trend is clear, and the need to steer another course great.

This is obviously a pay for performance issue. If a CEO brings about change in a positive, profitable way, then their involvement in making the corporation cash and thus providing shareholders with greater equity should be rewarded. However, perspective and proportion are the keys here as a balance is needed in the relationship between shareholders and employees, i.e, there should be equity and a fair mechanism in place which allows everyone to benefit in an equal way -- in proportion to the net gain. Great idea in theory, but the current reality is an application of discretionary abuse which has turned criminal.

Having just witnessed the era of subprime meltdown -- the CEOs that have been at the helm of derivative fueled engines have been highly rewarded for contributing to an atmosphere of fraud and misleading, falsified information, versus being investigated and then placed in Federal prison cells like the crooks that they are. To make matters worse and to compound this criminal behavior, most every CEO involved in this systemic financial collapse is being rewarded at a rate never before imagined -- as their corporate EPS and profits vaporize into infinite black holes!

Puke!

This anti-market piece in a supposed business publication? What a joke! Your underlying premise seems to be that, as most liberal journalists/socialists believe, the market doesn't work in the area of CEO compensation. Apparently the market will bear such levels of compensation or the boards and compensation committees wouldn't pay them. Now that more and more regulation is making CEOs personally liable for the actions of all employees, the pool of folks willing to take the jobs is shrinking dramatically. Less supply, same demand, higher price/pay. What concern is it of the "poor" employees what the CEO makes if the company keeps making money and they keep their jobs? If they don't think they're getting paid enough, go do something else. How tough is that? Your socialist rant is straight out of Atlas Shrugged...get ready for the downfall of U.S. business and society if you get what you seem to want.

CEO’s are the coaches, generals, leaders and “risk takers” that can make or break their company. If they have a bad day on a product line “decision” it could means millions and the company’s reputation in that industry; it could mean the stock plummets and all lose. It may reduce the company’s ability to finance a new product line.
The stock holders need to be more diligent when reviewing the salary & bonus structure of the new CEO. The government should not have a say in the pay structure that is negotiated for employees at any level. I would hate to have the government review all salaries before we could hire an employee; no one would be working or paid on time in the US. Stop the politics of buying votes and risking our freedom “to make as much money as we can negotiate”.

First, I am truely flabbercasted by the many comments and idealists that have brought forward awareness to these exuberant pays of the chief executives. I am sick and tired of this diabolic scheme of how highly paid they are and the huge contracts they get for themselves whether they perform or not, it is ludicrous not to mention unethical and qualifies for lack of empathy. I have gone through 4 companies with chief executives and their counterparts to sell out the company, exchange hands and we, who are the low end employs, having to face layoffs and in some form or another faced with family affects. Yes, it is good to embrace change and that America is a collages of free enterprise, but enough is enough...chief execs should be accountable for their actions and wheher they are successful and strong leaders, they should be measured in away by how successful the company is and not their paychecks. We lost our jobs and they walk away with millions. I agree that their salaries should be capped even if the prove their successes and also starting thinking more align with fair equity for us workers as we are the ones that make them look real GOOD. and if I hear one more time 'it is in the best interest of the shareholders'..I'm gonna cry! How many homes, cars and mistresses does one need......enough is enough, you want good followers, then you need to be a good leader!!!!

My two cents for the day!

Dani

First, I am truely flabbercasted by the many comments and idealists that have brought forward awareness to these exuberant pays of the chief executives. I am sick and tired of this diabolic scheme of how highly paid they are and the huge contracts they get for themselves whether they perform or not, it is ludicrous not to mention unethical and qualifies for lack of empathy. I have gone through 4 companies with chief executives and their counterparts to sell out the company, exchange hands and we, who are the low end employs, having to face layoffs and in some form or another faced with family affects. Yes, it is good to embrace change and that America is a collages of free enterprise, but enough is enough...chief execs should be accountable for their actions and wheher they are successful and strong leaders, they should be measured in away by how successful the company is and not their paychecks. We lost our jobs and they walk away with millions. I agree that their salaries should be capped even if the prove their successes and also starting thinking more align with fair equity for us workers as we are the ones that make them look real GOOD. and if I hear one more time 'it is in the best interest of the shareholders'..I'm gonna cry! How many homes, cars and mistresses does one need......enough is enough, you want good followers, then you need to be a good leader!!!!

My two cents for the day!

Dani

It appears that on the two ends of the compensation continuum the idea that a product or service is "worth whatever someone is willing to pay" does not hold. At the lower end, the prevailing opinion seems to be there is a "floor" below which no human being should be asked to labor. At the higher end, there seems to be a growing sentiment that there is a "ceiling" above which no human being deserves to be compensated. This apparently does not apply to those who are not on a payroll, such as wealthy farmers, investors, as just two examples. Pay disparities (difference between what I get and what someone else gets) have always been more important in job satisfaction than the nominal amount of pay. One has to ask whether this perspective is accounting for some of the current concerns. In other words, if all of us were millionaires and there were no billionaires, would we still press to lower the ceiling? If all of us were paid within 20% of $60,000, would we still press to raise the floor? And then, wouldn't we begin to go after the wealthy farmer and investors?

When the CXO leadership of a firm is compensated by different mechanisms than those of its own employees, it undermines the ability of such leaders to empathize with its employees' material needs. Disparity arguably sours the relationship in other ways too.

Yet to highlight the obvious without advancing a solution is of limited utility. What we must do is engage in constructive discourse to level the playing field. Since the margin of compensation will not be ceeded voluntarily by those in power, it must be coaxed from them by stick and carrot. The discussions then that should be taking place are those that uncover the pressure points and those that illumnate common interests.

For starters, I propose, not an absolute salary cap but a relative one. If, societally, we undertake public discourse, the shaping of alliances, and the strategic selection of those companies on the edge of change to institue reform, those changes would be short-lived if we pegged a salary cap to some absolute standard as the Social Democrat in Germany suggests. Instead, relative caps (e.g. the compensation of the highest paid employee shall not exceed 40x the compensation of the lowest employee), seem a much more difficult proposition to overturn and refute. If the profitability of an industry is high and the position of the firm within it lucrative, then let everyone share in the wealth, but let them do so proportionally.

Gil

just a couple comments:
Everyone has a right to negotiate their salary, don't fault CEO's for trying to get what they think they deserve. That is unless you work under a union contract, then I think you cannot negotiate what you get, you have to get exactly what everyone else gets paid.
On the other hand, my understanding is that in a public company, the Compensation Committee of the Board of Directors performs the work to come up with the CEO salary. Some of the tools they use are comparative salaries of other CEOs in similar size companies, as well as the industry average. So, the flaw is that if the industry is already over-inflated, nothing is going to prompt any one business from reducing their CEO pay. Board members of various companies could possibly collude to reduce CEO pay. That would be a start. Otherwise, stockholders will have to become more vocal when it comes to CEO pay, and not only complain about the CEOs but complain about the board members who are approving the pay.

I see pressure on executive pay as part of an overall trend back towards community values. We are beginning to expect businesses to be more than just profit generators. We expect them to contribute to communities. We expect them to be green. We expect them to give back. Leaders who collect astronomically high salaries are clearly out of touch with this general shift in values.

Leaders who lead in a more values driven way are not focused solely on pay. They have a much broader set of markers for success.

I think the pressure for change will come not just from employees and shareholders but from customers and from peers.

high ranking officials mostly in a big companies are having an excessive pay because of their intellectual contribution for the growth of the company, like strategic planning in the aspect of financial, marketing, operational and management itself. Its an obvious that there is no equity between the high and middle level position. But most of the hardworks have actually designated to the middle/lower management in which case should have been equally compensated.

Mariafe Plaza
dated: May 16, 2008

In the current non-recession, where cost of living economic impacts are not factored into GDP or NDP, we still seem to have lingering doubts as to how inflation interacts with corporate growth and thus, CEO compensation. It is my understanding that CEOs will be rewarded for inflation induced growth, yet co-employees, i.e, the workers that do real things, will either be laid off or see salaries decay. Perhaps inflation is just another risk metric that these mighty engineers have to face as they collect multimillion gains for doing nothing.

In regard to inflation -- Fed Chair Bernanke is sold on the premise of "positive inflation" which is basically a theory that it is better for The Treasury to print as much money as it takes to thwart a deflationary spiral. This theory essentially greases the wheels of a trickle down supply fantasy, sugar coated, and in a nutshell, takes advantage of the amount of money flow sloshing about the economic pool.

Positive inflation is a condition of rising prices, rising costs and of all (damn) things EPS growth for corporations. Oddly enough, the rising price of goods in the economy has the magic effect of increasing sales through higher costs. The illusion on paper works well, because it implies growth during a time of decline, thus to a point, increased costs increase product costs which result in increased earnings. To be sure, year-over-year growth declines as fewer people purchase higher priced goods, but an interesting point here, is to note that in regard to CEO pay, this EPS anomaly is distorting the concept of pay-for-performance -- i.e, we can now have a criminal-like CEO that has manipulated earnings beyond the realm of imagination to a point where they can actually do less going forward and make more in compensation in a compounded way.

One has to step back and realize that EPS for a lot of subprime related industries had been crashing as a result of false and misleading earnings manipulation -- but now, thanks to Wall Street and Bernanke and Coup, we can look forward to even higher compensation for many of these CEOs that are on board The Bernanke Positive Inflation Fantasy Train!

Greed is the culprit. Some commenters here seem to think these guys are simply pursuing the American Dream. What they are doing for most of us is creating our American Nightmare.

In this era of energy shortage and power cuts each one of us is contributing to switching off the light at the end of the tunnel instead of building the shining stars that will give eternal light.

Till such time, where the current leadership apes the younger generation on instant gratification rather than investing on building stars, God save the king (and his kingdom).

Go look at the Scandinavian spread of pay between top executives and the lowest paid emplyees of a firm, of a society. Economics lives not only in the US, and it works.

Even in India also the same situation is prevailing. The salary levels are disproportionately different between employees and bosses. This is more so in the case of privately owned and foreign banks. Indian banking industry is a matured one and we have a tough regulator viz Reserve Bank of India (RBI). The supervision of RBI over banks is absolute and the regulator sets the direction for the banking industry to follow. In such a case why this large disparity in wages because CEO only presides but the rest of the work is done down the line. Further, banking failures are not common in India unlike in other parts of the world and there should be a rethinking on the wages by the regulator so that the widening gap can be bridged.

It reminds me of Self Appointed Custodians of Morality in India who have opinion on everything from what to wear to how to behave. In the garb of idealism, they terrorise high achievers, celebrities, large corporate and in turn rake in wealth by foul means.

In an environment of professed free market, all issues pertaining to company should be left to investors’ and their appointed caretakers. Role of government should be limited to oversee legal compliance by company. Community plays its role to ensure that company’s presence among them does not create a nuisance in physical (pollution etc) and mental environment (objecting to a strip joint next to school etc). So in effect we leave it to people to worry about their money and the process / tools that they deploy to make it grow.

Hence, CEO salary is an issue that concerns only the investors. Their performance or lack of it is also in the domain of investors.

In case investors wish to eliminate excessive payment to non-perfoming CEOs, they can insist on low fixed and very high variable pay.

Sometime I think investors hire CEOs in the same spirit as a lottery ticket purchased by a poor man; both are looking for jackpot. So, losing ticket ends up in dust bin.

It reminds me of Self Appointed Custodians of Morality in India who have opinion on everything from what to wear to how to behave. In the garb of idealism, they terrorise high achievers, celebrities, large corporate and in turn rake in wealth by foul means.

In an environment of professed free market, all issues pertaining to company should be left to investors’ and their appointed caretakers. Role of government should be limited to oversee legal compliance by company. Community plays its role to ensure that company’s presence among them does not create a nuisance in physical (pollution etc) and mental environment (objecting to a strip joint next to school etc). So in effect we leave it to people to worry about their money and the process / tools that they deploy to make it grow.

Hence, CEO salary is an issue that concerns only the investors. Their performance or lack of it is also in the domain of investors.

In case investors wish to eliminate excessive payment to non-perfoming CEOs, they can insist on low fixed and very high variable pay.

Sometime I think investors hire CEOs in the same spirit as a lottery ticket purchased by a poor man; both are looking for jackpot. So, losing ticket ends up in dust bin.

Aberration in gaps between salaries of those on top and the rest has always been an issue. Some sectors might have improved on this while others have eroded with gaps getting wider. It goes without saying that be it a turnaround of a corporate from rubble to sky or vice -versa, the CEO has the biggest influence on the shift. Hence be it a crown or the noose, CEO has to be the first recipient of either.

Some times vicious cycle of companies in crises hiring celebrities for fat pays, and eventually ending up with bigger crises makes matters worse.

The gap in pay raises an important question. Is gap in merit as wide between the CEO and the rest as the pay is ? What should be CEO's share of the pie viz a viz shareholder's or the employee at rock bottom of the ladder?

Rare does one come across CEO's who forego fat salary cheques because of underlying sense of social fairness. Boards should fix maximum multiple that one can draw as fixed pay per level of the ladder viz a viz fixed pay of the shop floor employee, or any other level it may choose as index. The component of incentive on performance could vary. Ideally incentives on performance and non financial perks that directly impact business could be huge. They should bother none.

Apparently it would seem that finest companies would have least gaps, meaning merit is well spread ( ie if merit equates to pay ) across hierarchy, but on close scrutiny of any industry, one finds all kinds of examples wrt variations in salaries. Gaps from top to bottom in some of the IT companies are as wide spread as 30 to 60 times the salary of the chap at the lowest rung of the ladder and this when the lowest rung considered also is an engineer carrying a bachelor’s degree.

One conclusion is definite. Lesser the variation, lower the attrition rate of employees.

I think this discussion is overdue and I appreciate the fact that Harvard is taking the lead. The growing income gap between top management and the general workforce has become a dominant issue in the German political debate and proposals to regulate exective pay may spill over to other western countries.

A real concern to me however is the disconnect between performance, risk and pay. The biggest risk a CEO faces when being confronted with underperformance is his dismissal - usually softened by generous extra payments. In contrast to this stands the entrepreneur (owner of a company) who may hugely benefit from the good performance of his company but who also carries huge personal risks in case of failure.

Executive pay should be visibly connected to performance and risk to remain motivating within a company. This will be even more important with regard to the general political debate and may make exisiting gaps socially more acceptable.

CEO's have high income because they deliver high results. That's also a market issue, if a company pays only 1 million for a very good CEO there is a chance of loosing him for a company that is willing to pay 25.

I consider this kind of considerations an anti-freedon attempt, and a signal of social hate. The CEO income must be regulated by the market, just like any other. Or we should limit the income of soccer players, singers, movie stars and in the future even doctors.

The argument that the market should be allowed to regulate CEO pay is a farce. The market isn't allowed to regulate anything truly or completely, unless you're Sally Schmoe small-time entrepreneur.

CEO pay is out of control. I don't see the risk. Do well and you'll get paid buckets of money. Lose and bring our company to the brink of failure, and we'll still pay you buckets of money. Buckets and buckets. Let's get real. Where's the risk?

You know what I'd like to see? A CEO who negotiated his/her salary for the "market value" and then announced that s/he was going to accept X dollars of it for the year, with the remaining Y dollars (including all the variable" you-do-a-great-job-and-you're-gonna-make-BUCKETS-of-money" dollars) to be split among the employees of the company should a, b, and c attainable goals be met by year end. And then the next year, do it again for a new set of goals.

I'd invest my money in that company and in that CEO.

CEO's job is very critical that it can either make or break a company. Consequently, CEO's pay has to reflect this aspect of the job.

However, CEO’s pay should also be highly aligned with the company’s overall performance and employee pay structure, from both short-term and long-term perspectives. Only when the reward goes to the one who is deserved to be rewarded, then the company’s fundamental performance can be up to the level that is truly competitive in the market place. It would be very domotivating if a company and CEO makes great money but first line employee who has making this possible on a daily basis is not rewarded for their superior performances at all.

Not sure if there is a universal solution to strike the perfect fairness. But it is never too late to ask this question and get answers from everyone involved in the process. Eventually, it will achieve the fine balance needed.