Lavish CEO pay doesn't work as intended: study

[trailmonkee]

Source: nbc news

The arms race in CEO pay doesn’t help performance or retention, according to a new study.

Outsized CEO pay has been a bone of contention for shareholders and a flashpoint for public discontent, but was always justified with the conventional wisdom that if a company doesn’t pay its top brass top dollar, they’ll go somewhere where they can earn more.

Charles Elson and Craig Ferrere, director and fellow, respectively, at the John L. Weinberg Center for Corporate Governance at the University of Delaware, took aim at this long-held theory in a new paper, as reported by the New York Times last weekend.

"The problem is the standard practice of benchmarking pay to that of peers," the two wrote.

To determine how much to pay a CEO, corporate compensation committees look at how much the chiefs of similar companies earn, which has the result of lumping together all CEO talent into one pool. Elson and Ferrere argued that expertise in management isn’t the same, and isn't as good, as having a deep base of knowledge in one particular industry.

Read more: http://bottomline.nbcnews.com/_news/2012/09/27/14125675-lavish-ceo-pay-doesnt-work-as-intended-study?lite#__utma=238145375.1607569865.1342448430.1345527900.1348799192.23&__utmb=238145375.1.10.1348799192&__utmc=238145375&__utmx=-&__utmz=238145375.1348799192.23.4.utmcsr=drudgereport.com|utmccn=(referral)|utmcmd=referral|utmcct=/&__utmv=238145375.|8=Earned%20By=msnbc%7Ccover=1^12=Landing%20Content=Mixed=1^13=Landing%20Hostname=www.msnbc.msn.com=1^30=Visit%20Type%20to%20Content=Earned%20to%20Mixed=1&__utmk=68389202

[Permanut]

1. Thus providing solid evidence..

That Ayn Rand was more or less full of bull hockey.

Thom Hartmann spoke yesterday about how, if all the fat cats disappeared, as in Atlas Shrugged, that rather than society falling apart, there would be a scramble of new entrepreneurs ready to fill the void, but without the fat salaries.

[ck4829]

2. Come on now, the symbol for capitalism isn't Ayn Rand

It's more like Mr. Krabs nowadays.

[Permanut]

5. Mr. Krabs is the perfect analogue..

I had to look up the Spongebob reference; learn something every day on DU.

[Kablooie]

10. Mr. Potter isn't too far off either.

[cstanleytech]

3. Well, how best to sum this "story" up. I know! "Well DOH!!!!"

I mean really, is anyone not surprised that this study shows? I know I am not.

[AlbertCat]

4. argued that expertise in management isn’t the same,

... and isn't as good, as having a deep base of knowledge in one particular industry.



DUH!

[SoapBox]

6. "Lavish CEO pay doesn't work as intended: study"

Hell...like the 99% doesn't already know that!

[Bozita]

7. This study fits nicely into the "No Shit, Sherlock!" category

[geek tragedy]

8. It's intended to make CEO's wealthy, so yes it does. nt

[Thor_MN]

9. Corporate circle jerk

We need degrees of separation regulations. An executive should not be able to sit on the board of a company whose executives sit on the board of their company. Except with more like 6 degrees of separation. No more, I'll give you a 30% raise if you give me one.

[oldsarge54]

11. I like the Japanese law

I believe that Japanese CEOs are limited to 50 times the average wages of their firm. They want more, they have to raise that average for the rest of their people.

[groundloop]

12. BINGO !!!!!!!!

If that were ever to be considered here I can already hear all the whining - Govt. interfering in free enterprise, companies would be deprived of good talent, and on and on. But damn, I've got just as much education as most CEO's only mine is in engineering instead of finance, it pisses me off to no end that these bastards make 200 to 400 times as much as me.

[meow2u3]

13. You just found out, you dumb idiots? nt

[valerief]

14. Looks like conventional wisdom isn't very wise. nt