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The Highest-Paid CEOs Are The Worst Performers, New Study Says

Discussion in 'Business, Investment and Economics' started by sydboy007, Jun 21, 2014.

  1. sydboy007

    sydboy007

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    Doubt it will change anything, but some empirical proof that in aggregate terms, over paying for your CEO 'talent" ain't so good for shareholder returns.

    http://www.forbes.com/sites/susanad...ceos-are-the-worst-performers-new-study-says/

    Though Cooper concedes that there could be exceptions at specific companies (the study didn’t measure individual firms), the study shows that as a group, the companies run by the CEOS who were paid at the top 10% of the scale, had the worst performance. How much worse? The firms returned 10% less to their shareholders than did their industry peers. The study also clearly shows that at the high end, the more CEOs were paid, the worse their companies did; it looked at the very top, the 5% of CEOs who were the highest paid, and found that their companies did 15% worse, on average, than their peers.
     
  2. Smurf1976

    Smurf1976

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    It's probably fair to assume that those chasing the highest pay are simply doing the job for the money as such, as distinct from someone who actually wants to run the company.

    It rarely works out well if you employ someone, at any level, who has no interest in anything beyond their own pay and entitlements and that applies to any sort of work really.:2twocents
     
  3. Calliope

    Calliope

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    Sometimes when the wrong man is picked for the job then lack of "talent" ain't so good for the taxpayer either. Take the example of Mike Quigley, who was a very successful CEO on the retail side of the broadcasting industry at Alcatel. But when selected to head up the NBN he was a fish out of water. He lacked experience in broadcast construction.

    Of course, his appointment was political, but it does illustrate how you shouldn't try to put a square peg in a round hole. No doubt many CEOs, similarly, are the wrong men (or women) for the job.
     
  4. Wysiwyg

    Wysiwyg Everyone wants money

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    Well there is a difference at the highest paid level. If they get it wrong they have still pocketed a very large sum of money over the course of a few years. Enough money to never have to wear a suit again. Salaries that top level awarded themselves with shareholder approval and faith.
     
  5. sydboy007

    sydboy007

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    Very true. I think since the anglo sphere introduced legislation that forced the public disclosure of CEO and other C level pay that it's only gotten worse. Add in quite often the board of directors abdicate their responsibility and go to some private sector company to determine the correct pay, and the situaation is likely to just keep escalating.

    maybe a super tax on pay above a certain level of median income might help to alleviate the issue. Just make it uneconomic to pay over the top. Considering how the head of BHP and RIO basically cost shareholders tens of billions in wasted investment yet still walked away with plenty of $$ in the bank.
     
  6. Smurf1976

    Smurf1976

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    Something that I've often observed throughout my working career thus far is that employees who are good at their jobs and those who are always taking about pay and conditions are generally not the same people. The only real exception there is if there's a specific issue relating to pay and they perceive a genuine injustice (eg being paid less than others doing comparable work either for the same employer or someone else in the town / city) but other than that it generally holds true.

    I can't recall ever coming across someone who focused on their own pay whilst actually doing a good job as such. There's usually a tradeoff and it comes down to underlying attitude. Do a good job then present your case to be rewarded accordingly versus focus on pay up front and don't worry about the rest.

    If someone is a CEO and does a great job for the company over an extended period then I have no issue with them being paid well for doing so. But those who come in, "fix the place", then leave before it all falls in a heap aren't worth a cent really. Sure, they balance the budget this year and maybe next, but whoever comes next is faced with a great big list of problems to fix. Nothing was ever "fixed" as such, all they did was shift money from one bucket to another, usually destroying real value in the process.

    There are exceptions as with anything, but if anyone "turns around" a company quickly then that rings some serious alarm bells as to whether or not it's real? Or are they just avoiding expenditure in order to make the books look good today whilst leaving a dreadful legacy for whoever comes next? There's plenty of such people around and they're not worth a cent really.:2twocents
     
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