Elisberg Industries
  • Home
  • Blog
  • Products
    • Books
    • Movies
  • About Elisberg Industries
    • Our Corporate Board
    • Information Overstock
    • Elisberg Industries Entertainment Information
    • Elisberg Statistical Center of American Research
    • Consultancy Service
  • Contact
    • How to Find Us
  • Kudos
  • Good Things to Know
    • The BOB Page
    • Sites You Might Actually Like
Decent Quality Since 1847

Pity the Poor Exorbitantly-Paid CEOs

4/21/2014

0 Comments

 
On Friday, Slate had an article, which you can read here, by Zachary Kalabell, titled “Stop Obsessing Over Exorbitant CEO Pay”

Because, after all, "exorbitant" apparently doesn't mean what you or the dictionary think it does ("Greatly exceeding bounds of reason or moderation").  And CEOs who are paid greatly beyond the bounds of reason in fact deserve our sympathy and a hug.

I’m not even remotely an expert on the subject, unlike my friend Nell Minow who travels the world lecturing on this subject, and even I found the article idiotic.

That Mr. Taylor is described as a money manager turns out to not come as a huge shock.  In fairness, maybe he's done a lot of study and research on the subject.  But mainly, he picks and chooses random quotes that support his position from a career of managing other people's money.


Almost from the start, the author contradicts himself, mentioning studies that support the problem of exorbitant CEO pay, but then he blithely dismisses all of them as meaningless in order to focus on...two studies.  And of course the two studies he does like (compared to all the many mean and nasty studies he chooses to ignore in a mere sentence without going into any detail) say there’s no problem.  Making this even more off-putting is that the second of the studies he likes doesn’t even say that precisely, but says only that there isn’t enough evidence to say for absolute certain there’s a problem, though there could be.  Some support, eh, from half your "evidence."

He tends to do that sort of thing throughout the article.  For instance, he spends two paragraphs referencing an article in the New York Times critical of exorbitant CEO pay and even quotes an author who says, "
The system is pretty much out of control in many ways” -- and himself adds, "That may be true" and writes another paragraph explaining why so.  Yet then in a bizarre act of legerdemain, he ignores all of that and writes, "But does the widening gap between the pay of those at the top of the wealth heap and the rest actually harm those who are struggling or sinking?"

Worse though is that after making this sharp U-turn, ignoring everything he's written, his focus on the problem (which he says everyone is obsessed about) is off-base.  It’s never struck me that the problem is what he tries to make it:  that if CEOs don’t have exorbitant pay, we can use that money by redistributing it to help the poor.  That's a general argument used about income taxes, not paying CEOs beyond the bounds of reason.  What’s always struck me as the issue of exorbitant CEO pay (from what I've read by people who study such things) is that it's, in fact, perfectly fine for CEOs to make huge amounts if their companies’ performance dictate it -- but when a company does poorly yet the CEO still makes massive bonuses "beyond the bounds of reason", it's that which actually hurts the company and in turn hurts the economy.

Being paid exorbitant bonuses for failing is the problem.  Not
that people who succeed didn't help the needy enough.

Furthermore, it also strikes me that the issue has never been redistributing exorbitant CEO pay to the destitute, as Mr. Karabell tries to make it, but rather that when so many tens of millions of dollars in a single company are being siphoned away from the mid-range executives and employees of that company -- paid to just one executive who actually did a poor job -- you’re weakening the buying power of the middle class which again hurts the economy.  The issue of exorbitant pay to failed CEOs isn't about helping the poor, but for a company to use its resources to a) help the company, and b) help shore up its middle class, which is disappearing.  Even Henry Ford knew it was important that his employees could afford to buy his company's products.  That supports the middle class, which is what keeps the economy strong.

Mind you, all that's just my own non-scholarly opinion.  For all I know, I was way off-base.  So, I sent a note to Nell Minow with a link to the article.  As I've mentioned, Nell is the co-founder of the Corporate Library (now GMI) which is a major organization on corporate governance.  She's testified before Congress, was named one of the 20 most influential people in corporate governance by Directorship magazine in 2007, was called “the queen of good corporate governance” by BusinessWeek Online in 2003, and recently received Lifetime Achievement award from the International Corporate Governance Network.

The point is, she knows more about these things than I do.

Happily, she not only agreed with everything I wrote, but added her own 2-cents.  (Worth $1,000 when adjusted on the CEO pay scale, though her value is anything but exorbitant.)
  What she wrote back was --

CEO pay, like any other asset allocation made by a corporation, from marketing to operations, has to be evaluated in terms of return on investment, and in too many cases the ROI on CEO pay packages ranks lower than a piggy bank.  If these outrageous pay packages actually produced better results, I would support them.  If they reflected an arms' length, free market negotiation, I would support them.  But the numbers show the contrary.  If we pay people for poor performance, we get poor performance.  And if we let executives select and control the information for the board members who set their pay, those directors will continue to support compensation that is inversely related to performance. 85% of the non-executive Oracle shareholders have twice voted against the pay of Larry Ellison, who made $96 million in 2011 and $77 million in 2012.  But boards are permitted to ignore shareholder votes on pay, and that is what Ellison's board has done.  If Ellison is not sufficiently motivated by his 25% of Oracle stock, worth some $46 billion, then paying him at this level will not make a difference.  This is not class warfare.  It is capitalism, which is being destroyed by this wholesale diversion of shareholder assets to the pockets of a few executives.  The only financial benefit of these gargantuan pay packages is letting savvy investors know which stocks to short.
So there.
0 Comments



Leave a Reply.

    Picture
    Picture
    Elisberg Industries gets a commission if you click here before shopping on Amazon.
    Picture
    Follow @relisberg

    Author

    Robert J. Elisberg is a political commentator, screenwriter, novelist, tech writer and also some other things that I just tend to keep forgetting. 

    Elisberg is a two-time recipient of the Lucille Ball Award for comedy screenwriting. He's written for film, TV, the stage, and two best-selling novels, is a regular columnist for the Writers Guild of America and was for
    the Huffington Post.  Among his other writing, he has a long-time column on technology (which he sometimes understands), and co-wrote a book on world travel.  As a lyricist, he is a member of ASCAP, and has contributed to numerous publications.

    Picture
           Available on Amazon

    Picture
           Available on Amazon

    Picture
           Feedspot Badge of Honor

    Archives

    June 2025
    May 2025
    April 2025
    March 2025
    February 2025
    January 2025
    December 2024
    November 2024
    October 2024
    September 2024
    August 2024
    July 2024
    June 2024
    May 2024
    April 2024
    March 2024
    February 2024
    January 2024
    December 2023
    November 2023
    October 2023
    September 2023
    August 2023
    July 2023
    June 2023
    May 2023
    April 2023
    March 2023
    February 2023
    January 2023
    December 2022
    November 2022
    October 2022
    September 2022
    August 2022
    July 2022
    June 2022
    May 2022
    April 2022
    March 2022
    February 2022
    January 2022
    December 2021
    November 2021
    October 2021
    September 2021
    August 2021
    July 2021
    June 2021
    May 2021
    April 2021
    March 2021
    February 2021
    January 2021
    December 2020
    November 2020
    October 2020
    September 2020
    August 2020
    July 2020
    June 2020
    May 2020
    April 2020
    March 2020
    February 2020
    January 2020
    December 2019
    November 2019
    October 2019
    September 2019
    August 2019
    July 2019
    June 2019
    May 2019
    April 2019
    March 2019
    February 2019
    January 2019
    December 2018
    November 2018
    October 2018
    September 2018
    August 2018
    July 2018
    June 2018
    May 2018
    April 2018
    March 2018
    February 2018
    January 2018
    December 2017
    November 2017
    October 2017
    September 2017
    August 2017
    July 2017
    June 2017
    May 2017
    April 2017
    March 2017
    February 2017
    January 2017
    December 2016
    November 2016
    October 2016
    September 2016
    August 2016
    July 2016
    June 2016
    May 2016
    April 2016
    March 2016
    February 2016
    January 2016
    December 2015
    November 2015
    October 2015
    September 2015
    August 2015
    July 2015
    June 2015
    May 2015
    April 2015
    March 2015
    February 2015
    January 2015
    December 2014
    November 2014
    October 2014
    September 2014
    August 2014
    July 2014
    June 2014
    May 2014
    April 2014
    March 2014
    February 2014
    January 2014
    December 2013
    November 2013
    October 2013
    September 2013
    August 2013
    July 2013
    June 2013
    May 2013
    April 2013
    March 2013
    February 2013
    January 2013

    Categories

    All
    Animals
    Audio
    Audio Land
    Books
    Business
    Chicago
    Consumer Product
    Education
    Email Interview
    Entertainment
    Environment
    Fine Art
    Food
    From The Management
    Health
    History
    Huffery
    Humor
    International
    Internet
    Journalism
    Law
    Los Angeles
    Media
    Morning News Round Up
    Movies
    Music
    Musical
    Personal
    Photograph
    Piano Puzzler
    Politics
    Popular Culture
    Profiles
    Quote Of The Day
    Radio
    Religion
    Restaurants
    Science
    Sports
    Technology
    Tech Tip
    Theater
    The Writers Workbench
    Tidbits
    Travel
    Tv
    Twitter
    Video
    Videology
    Well Worth Reading
    Words-o-wisdom
    Writing

    RSS Feed

© Copyright Robert J. Elisberg 2025
Contact Us    About EI    Chicago Cubs
  • Home
  • Blog
  • Products
    • Books
    • Movies
  • About Elisberg Industries
    • Our Corporate Board
    • Information Overstock
    • Elisberg Industries Entertainment Information
    • Elisberg Statistical Center of American Research
    • Consultancy Service
  • Contact
    • How to Find Us
  • Kudos
  • Good Things to Know
    • The BOB Page
    • Sites You Might Actually Like