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CEO Bonuses: Necessary or Greed?

By February 12, 2009

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The compensation received by CEOs of large banks has been very prominent in the news the past few days. The public is outraged, but the only response is that these payments are necessary to attract and keep top talent. Considering the current state of their businesses, taking multi-billion dollar hand-outs from the government just to survive, I don't think their "top talent" is doing much for them. Even worse, they don't see anything wrong with such outlandish pay.

According to Michael Brush of MSN Money, "CEOs earned $11.3 million on average last year, a 27% increase from the prior year. Barry Diller, the chairman and chief executive of the IAC/InterActiveCorp, took home $295 million last year." No one is worth that kind of compensation. Period.

One of the most valuable things you can do is to be involved if you are a shareholder. What if you are a stakeholder (all employees are), but not a shareholder? You still need to be concerned and get involved. The wider the gap grows between CEO salaries and that of their workers, the more likely the company is to fail. To read more about what you can do, read CEOs Are Overpaid. At the bottom of the article are links to two Michael Brush articles with specific things you can do to "fight greedy CEOs".

What do you think? How should the US handle this crisis of confidence? Click the comments link below and add your thoughts.

Comments
February 16, 2009 at 3:36 pm
(1) John Hunter says:

Overpaid CEO’s are not needed. The ludicrous pay for many CEO’s in the USA is a very serious problem that greatly impairs the success of those companies.

Obviously those that failed so catastrophically that the government decided to pay billions to reduce the economic harm do not deserve to be rewarded for their failures. But the problem is far greater than those few failed CEO’s. The harm done by the culture of entitled executives is far greater than a few executives, at large banks, feeding at the entitlement trough.

My posts on executive pay:

http://management.curiouscatblog.net/tag/executive-pay/

February 17, 2009 at 8:20 am
(2) Firozali A Mulla says:

CEO Bonuses: Necessary or Greed?
Honestly, I feel that the CEOs are the entrepreneur of the corporations. They are the ones who drive the bossiness. May be there are some who are greedy but the rest are trying the hard to keep the corporations floating. It is no good to brand all as greedy. The pay is proportionate to the skill required. You pay peanuts, you will get monkey. The pay is equally a stepping-stone for many to go up further in the ladder giving a boost to all. Cut this pay, we have the problems of slow work or the lazy attitude
I thank toy
Firozali A Mulla

February 17, 2009 at 11:37 am
(3) Matt Aguilar says:

CEO are the accountable corporate representative the BOD. This means they should rightly be compensated at a greater rate than anyone else. No one disputes that. However, their compensation should tied tightly to business performance. If the business they are accountable for leading is NOT meeting business objectives and is not operationally functioning in such a way that brings returns to investors, then that CEO is NOT getting it done. Why compensate and reward CEO for poor peformance? That is the question that boggles my mind. And that is the way of things on Wall Street right now. Too many people receiving too much money for truly BAD business performance. It is outright FRAUD.

February 21, 2009 at 7:26 am
(4) CloBrun says:

I believe that the current situation is a sad reflection of what is wrong in our society. By allowing these outrageous bonus we encourage incompetency, particularly for those failing enterprise. Where is the conscience of our company leaders?

It is these same CEOs who lack the foresight and strategic thinking in the market place and replace it by short term gratification.

This short term thinking has brought this powerful economy to his knees and the fall of once leading companies.

I hope shareholders and investors will now look at CEOs and companies that embrace best practices and will value sound planning and strategic outlook that ensure sustainability, even thought it might mean less profits in the long run.

In the end, ensuring long term jobs jobs and the well being of employees, is in the interest of all citizens. Short terms schemes to richness always lead to disaster.

Claude

March 10, 2009 at 9:04 am
(5) V erona says:

CEO”S of the banks caused the biggest financial problem the US and the world have experienced. It is because of their negligence and greed that made this happen. No One on earth is worth that pay. They should all be ashamed of themselves and as far as skill? what a joke!! They can’t even do what they are paid to do! And people dislike unions????? Now bank CEO’s are viewed as crooks who need to remember that you have to earn respect to get it in return. Shame on you all for turing most people’s lives upside down…but I guess not yours right?

October 27, 2009 at 8:15 am
(6) Dave says:

Whilst I agree that top talent, that actually delivers on that talent merits higher rewards; those rewards need to be affordable by the business. I would also add that measuring success is only meaningful over longer periods; then you can start to filter out the role played by random chance. I would suggest the solution to CEO pay in listed companies should be influenced more by shareholders and less by the sometimes self serving senior management.

October 27, 2009 at 10:52 am
(7) John says:

I can not understand why the cost of attracting “top talent” has to be so great. I believe, first, that there must be many people capable of matching the quality of the performances of these so called “top talents” and if the board of any particular company did their jobs correctly they could find top talent and pay them a just compensation and not necessarily such an absurb amount. Second, I personnaly can not fathom any person, regardless of the quality of their work, being worthy of so much more than the next guy/gal who brings equal dedication and intelligence to their job. To state that the CEO of a company made so much money or saved so much money for a company ignores the many persons within that company who contribute to that success. Just like a great football quarterback or running back who would have no success without a quality group of lineman blocking for them a company manager would not have success with out the people, from the top of the ladder to the lowest level intern, contributing. Having said that, I believe it is the sole responsibility of the owners and the board members of any company, and only they, who should decide how much that position is worth to that company.

February 10, 2010 at 9:20 pm
(8) Ken says:

Ceo’s that get bonuses from failing institutions that recieved bailout monies should look back to see what their compensation would have been out walking the streets along with the people they sent to the streets!

Simple as a Captian of a ship that was pirated run out of fuel had to be towed to port. Then demanding a bonus.

Wake up.

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