Another Example of an Overpaid CEO

Nicomp, it's been something, whenever I see it on the ballot, I vote for. It's gaining some momentum, thankfully, as well. Each time it gets voted on it seems the percentage rises a bit in favor of it. I always vote against executive incentives if I know that regular employees are not offered incentives and bonuses as well.

Drbj, any time. I loved the hub. For me it comes down to being rational about things. EVEN IF Mark Hurd did nothing wrong, is he worth $42.5 million? $24 million? Is the CEO of McDonald's worth $17.5 million? We ALWAYS talk about cost cutting when it comes to companies. We talk about making hard decisions. We NEVER talk about CEO's or other executives giving up THEIR money. Even when they do slash their pay massively, it's still akin to winning the lottery every single day you step into the office. Technically, most of these guys could cut their pay 100% and still live extremely well. And that makes it laughable when you say to the people on the bottom rungs, "I've had to make sacrifices too."

Yeah. Right. What? You had to move from a 10,000 sq.ft. house to a 5,000 sq.ft. one? You had to trade in the BMW for a Cadillac? You had to downgrade from eating lobster every night to steak?

Pardon my French, but frankly I don't think these guys know a sacrifice from their ass.

Msorensson, I will agree that companies hire people. I've never disputed that. HP, overall, I will concede also provides fairly good paying jobs...it's a tech company and they tend to offer better pay and yes, even better benefits. Still. I just don't see the correlation between the two. The ends simply do not justify the means. Not when there is such massive disparity between his pay and everyone else's pay. It just doesn't wash with me. If you are an employee of the company, which is what a CEO is, you should be subject to the same rules as everyone else. You should be paid on the same reasonable basis as everyone else.

According to everyone at the top, everyone at the bottom is overpaid but the CEO is reasonably paid? Huh?

BTW, you think he should have simply been disciplined? Do you know how quickly companies fire regular people for exactly the things he did? You can't punch in 5 minutes late without being heckled, disciplined, and have your job waved over your head.

If I worked for Coca-Cola Enterprises and stole a $5 case of Coke, I would be fired on the spot for it. They fire me because stealing hurts the company's profits.

Scandals don't? Lawsuits from alleged sexual harrassment don't? Drops in stock price don't? Exorbitant pay for lackluster performance doesn't?

Mark Hurd's scandal, as I pointed out, will likely cause a dip in the stock price. That hurts the company. That hurts the workers who have a stake in the company's stock. That hurts the reputation of HP.

How much of this garbage was happening during company time by the way? On that $10,000+ an hour time...in the interest of keeping it real, here. A regular employee cannot even check his personal email for 30 seconds without someone coming around to tell him to get back to work or else. After all, doing personal things on company time costs money. It lowers productivity. God forbid you take a personal call on your cell phone.

If you don't offer regular employees money for getting it wrong when they are asked to leave, who would likely NEED the money and the benefits by the way, then why would you offer the CEO multi-millions. What kind of a DISINCENTIVE is that to do a bad job? If I knew I'd get paid regardless of what I did, would I really work that hard at it? Listen, so many people make the argument that getting a $300 check every week makes a guy too lazy to go out and get a job. So, you think that handing a guy $40 million DOESN'T make him give a care less what he does, how he does it, or how it affects the company?

It doesn't make one iota of sense to me.

In any event, I appreciate your opinion, even if in this particular case it disagrees with mine. :)

Eovery, I have come to the conclusion that the "pedestal" we've put our corporate CEO's on is very overrated. These guys don't make tough business decisions, IMO. They make no-brainer easy ones. They cost cut not by improving efficiency, or by REALLY innovating product half the time. They simply cut jobs, reduce wages, lower benefits, and send jobs out of the country. Those aren't brilliant ideas. They are short term fixes that make them LOOK brilliant in the short term so they can make an argument for a great paycheck as revenues go up, and sales go up, and the share price goes up, and costs go down.

These guys are no great businessmen. Not all of them. You can spot a REAL businessman when you see one. And THOSE guys are worth the money. But they are few and far between.

Tom, it is not so much that, but the fact that a change of leadership causes uncertainty as to the future direction of the company. That's why the price drop.

Drchris, yes, and please the money at the door. If you do a poor job, should you get a huge multi-million dollar severence? The simple answer is no. The reality is, they do get them, and I think there is something very wrong about that.

Hello, in my view (and its not a popular one for a conservative such as myself perhaps) workers are treated like cattle led to the slaughter. Simply a means to an end and nothing more. It's deplorable.

Sheri, in some ways I think it's different when we're talking about what athletes or actors, or mucicians get paid. I want to stress, in SOME ways it's different. I think athletes, in particular, are a bit overpaid. But the difference for me there is that there tends to be a more direct correlation between the players and the revenues they draw, or the actors and what they draw. People pay to see the person. In the case of a CEO, no one is buying the product for who is running the company. It's about brand equity, quality, performance, and that tends to be more related to the collective whole effort of the corporation rather than just one man.

Sheila, indeed. I really do think it comes down to that one word. "Integrity." I would honestly have some guilt and some shame if I were to honestly believe I was worth 440 times what the bottom of the rung was worth. If I looked in the mirror and saw myself, and didn't realize how much hard work, effort, and REAL sacrifice the average worker makes to put food on the table, and keep the machine running (the machine of the company of course, not necessarily an actual machine) that allows me to have my elaborate lifestyle, that would be shameful. CEOs sees regular employees as cost. They see them as a liability. They do not appreciate them, at least the majority of them do not. They talk about them as unskilled, and replaceable. A dime a dozen. It's shameful to me. It's also far removed from the reality. And if there ARE some employees who don't put as much effort forth as they might have in them to put forth, it might just be because putting forth effort for $23.17 an hour is simply not worth it when that effort translates to $10,000 an hour for a guy who probably spends a LOT of time on a golf course. Or on a yacht.

Not to say a CEO doesn't work hard. But let's not confuse an HONEST days work, sweating for a few bucks an hour with what a CEO does for that BIG paycheck.

Jessicababel, there's nothing wrong with getting paid for a job well done. In fact I applaud it. Mulally at Ford is a good example of a job well done, and I think he's worth MOSTLY every penny. He's actually got the workers in mind. I think that's a plus. He's done very well for the company, and workers have him to thank for keeping the production lines running to the best of his abilities, and keeping workers working.

Still, all things considered, he probably still is a bit overpaid, though I'm a little more okay with him in particular because of what he's been able to do with the company, and what I think is an honest commitment to keep his workers interested in making great cars.

Still. 440 times the average worker is justifiable? Come on. Really? When we sit here all day long and talk about cost cutting, it gets sickening when the conversation is always about the overpaid line worker. OVERPAID LINE WORKER? Really? The conversation is never about the CEO's pay. It gets sickening when we talk all day about "if we pay the workers more, they'll just get lazier." And then say, "If we pay the CEOs more, they'll go the extra mile." It just doesn't wash. It doesn't make any sense.

Aside from the whole pay issue, the severence package Hurd is getting is another thing that just really irks me. Most regular employees who leave under bad circumstances, which is WHY Hurd is leaving, are lucky to get a handshake as they get escorted out the door. THIS guy gets a $40 million deal.

To Msorensson I said, "If you don't offer regular employees money for getting it wrong when they are asked to leave, who would likely NEED the money and the benefits by the way, then why would you offer the CEO multi-millions. What kind of a DISINCENTIVE is that to do a bad job? If I knew I'd get paid regardless of what I did, would I really work that hard at it? Listen, so many people make the argument that getting a $300 check every week makes a guy too lazy to go out and get a job. So, you think that handing a guy $40 million DOESN'T make him give a care less what he does, how he does it, or how it affects the company?"

All I'm saying is that we have to be a little bit realistic about what a guy should be paid. We should be looking at three main things that are going to drive the company forward. The CEO. The shareholders continued investment. And the workers who make it all happen on a day to day basis to produce the products, get the products to market, and whatever else. All three parties must be kept afloat. All three parties must be incentivized. You can't take from one and expect the process to stay strong. If the WORKERS feel sleighted. If they feel cheated. If they feel they are not getting their share of the prize that is the result of their efforts, they'll expend less effort. They'll take less care in the product they make or the service they provide. And when they DON'T take as much care, who suffers are the top two. The CEO who gets blamed for lackluster performance and the shareholders who lose value in their investment.

Moreover, when you ask, "What's wrong with getting paid for a job well done?" I say, nothing at all, so long as everyone doing a good job is also paid for a job well done. Again, why is that "good job" phrase only applied to the top? Why is it we have this unwavering idea that everyone who punches a time clock is a lazy, bottom-feeding bum?

They work hard too. So, where are the bonuses for the employees? Where are the perks and incentives? Where are the big pay raises? Why can't a regular employee leave with dental and medical beneifts intact? Why are they only offered COBRA, which no one can truly afford without a paycheck coming in? Hurd is leaving HP with both, and surely he can afford private insurance on his own with the money he's made, and has, and will be leaving the company with. Employees on average see their pay increase by maybe 2% or 3% a year. CEOs often times see double digit increaes between salary, bonuses, stock options and other perks.

As to the WHOLE CONCEPT of getting paid for a job well done? Well, that's a SERIOUS question if you ask me. Bob Nardelli who made $100 million leaving Home Depot for poor performance is one shining example. The whole idea of the "golden parachute" is to cover your ass and loot the bank in the event the company decides they don't like you anymore...even if it's your own fault and you've done something wrong.

NO regular employee gets a deal like that. They're lucky if they get an unemployment check.

I think there is a HUGE difference between getting paid for a job well done and just getting paid to breathe and sit in a particular chair, and if you ask me, where we are at today is outrageous.

Kflippin, I am not for salary caps set by boards or shareholders, nor am I for government regulation of executive compensation of any sort. That said, I do think shareholders should have a say, EVEN IF the majority of those shareholders who will vote are likely still the same guys who are on the board and in the executive offices. But I also believe ALL employees should also be paid in company shares to the tune of at least 10% of their total compensation. When employees have a stake in their company, they also have a much better and realistic opportunity to participate in the success of the company, and have a greater opportunity to achieve better earnings in their lives—I have always thought that if employees felt more a part of the system they would take more care and pride in helping it to prosper and grow, and that adds value to the company, the brands, and the shareholder's shares. Employees who own shares would also be more a part of the decision making process at the top, which I think is important.

As for the "hard work" of CEO's, I don't want to make it sound like they don't work hard. Of course they do. It is by no means a job without its stresses. But I still DO NOT believe that they are worth $10,000+ an hour, which is based on an 80 hour week (at the $42.5 million Hurd got in 2008), not a 40 hour week. I should also point out that most people in manufacturing do not put in 40 hour weeks either. Weeks tend to be more around 50-60 hours, and it's back breaking work sometimes in very unsavory conditions. Even at Skinner's (McDonald's CEO) lowly $17.5 million, an 80 hour work week would put him at $4,206 an hour, or roughly 400 times the average wage of the guy flipping the burgers. It's still not justified if you ask me.

LRC, I am not for government intervention. The last thing in the world I want is for the government to have any say whatsoever in what people get paid—minimum wage is another story. You have to at least have a starting point to work with. I just want to make that clear.

As for those severence packages, I dislike them way more than I dislike CEO compensation packages, and for the very reason I state in the article, and you stated in your comment. These severence packages are being offered to the tune of millions of dollars EVEN WHEN CEO's get it wrong, and make mistakes, or worse. Not a single regular employee in America gets rewarded for bad behavior. He does something wrong, and he gets a letter in the mail telling him his unemployment benefits have been denied because he screwed up and the company feels they shouldn't have to pay for that.

It's wrong. Plain and simple.

Sunflowerbucky, very well said. As for athletes, actors, musicians, I draw a slight distinction there—but I stress the word slight. I commented to Sheri Sapp, "The difference for me there is that there tends to be a more direct correlation between the players and the revenues they draw, or the actors and what they draw. People pay to see the person. In the case of a CEO, no one is buying the product for who is running the company. It's about brand equity, quality, performance, and that tends to be more related to the collective whole effort of the corporation rather than just one man."

Nifty@50, that argument is the one everyone likes to make, "If the CEO makes the company money he may be worth the money." It's way off base. When you do the math and look at the numbers that are out there, you quickly realize that what you get paid as a CEO really has nothing at all to do with how well you do AS a CEO. It has to do with how well you can negotiate a contract.

Interesting sidebar to think about; the first question an employer asks of YOU is "what can you do for us?" And the first question a CEO asks of his company is "what can you do for me?" Granted, you could say the board, before they offer the CEO a job, already has looked into his/her credentials. Still...

Look at all the multi-million dollar bonuses AIGs execs got? For a job well done? I hardly think so. Bob Nardelli of Home Depot took over $200 million when he left, and the company's stock price was down. Henry McKinnel left Pfizer with almost $200 million as well. Why did he have to leave? Pfizer's board thought he was a lousy CEO.

Great to be a lousy CEO and get $200 million.

Granted, these are high end examples. But the list goes on. But these are guys who get paid millions regardless of whether or not the company does well, and who enter into their CEOship with contracts that allow them to walk away with multi-million dollar severence packages EVEN IF things go sour.

NOT ONE SINGLE REGULAR WORKER GETS A DEAL LIKE THAT. I'm not shouting, just emphasizing. There is no way in the world anyone will ever convince me that what these guys get paid is justified. There are just too many examples to contradict that.

How we change that? Ugh. That's the $64,000 question. We know we HAVE to, and that we should. But how do we do it without caps, and without government intervention?

Msorensson, yes. Regular employees walk into the door with no benefits, no vacation, no sick days and they usually have a period of time where they have to be on their best behavior. Once they do obtain these things, benefits and vacation time, their jobs are always in jeopardy for a variety of reasons, including disciplinary ones. If they get fired or decide to quit, they have to fight the company to get unemployment in most cases. They do not usually get a severence package. If they DO get a severence package, it is rarely ever equivalent to a year's salary.

CEOs walk in the door with immediate vacation, immediate benefits, big bonuses before they've proven a thing AT THEIR CURRENT COMPANY, AND on top of that usually negotiate severence packages that are payable NO MATTER WHAT the reason is they will leave the company, and often times those severences are worth several times their salaries and bonuses and stock options combined.

If you get fired and walk away with multi-millions, what's your worry? The regular employee on the other hand has a LOT to worry about.

Carolina, can I be on the firing squad? lol. It's always a difficult thing for me to explain regarding where I stand on this issue because generally, as you know, I'm not against rich people. The issue of CEO compensation, and the issue of CEO severence packages is just something that really grates me when I think of how lowly regular employees are looked upon as.

Tom, good point. I have ALWAYS had far more respect for those who are true businessmen. That is, those who built nothing into something from the ground up. And yes, they better understand what the trenches are like, and I think often times when they DO know, they treat their emoployees a bit better.

Billy, the thing that irks me the most is when these guys walk away with so much money for getting it wrong. I keep going back to the regular employees because I think its important—when regular employees get it wrong, they lose their jobs, and they don't walk away usually with a single penny. They are lucky to get an unemployment check.

Maita, the sad part is that once you decide to buy a printer other than an HP, the next company in the limelight may just be the OTHER guy...the sad truth is that this sort of stuff happens all the time.

According to what I hear to be the logic, a CEO is worth it all, and a regular man is worth nothing.

And still his $40 million check will be good, and many contracts just like his will continue to be written. That really is the crux of the issue, and the thing that I find most deplorable.

Rebecca, thanks. Always a pleasure to hear from you. :) Yes. $40 million for what is the $64,000 question.

Exactly. I think what CEOs deserve is probably about 25-50% of what they typically get.

The "what" they do part is sort of like this for me. I'll agree the job of CEO is not easy. There are lots of things a CEO has to bear the weight of. As CEO if you get it REALLY wrong, and I'm talking Enron wrong, or Worldcom wrong, or something like that, you could actually go to jail. BUT, and this is a huge BUT, is that still to justify making 440 times the average worker? I say absolutely not. Should a CEO be paid more? Of course. But when it's 440 times the average worker it's not compensation. It's legalalized robbery.