Skip to main content

View Diary: Why What Happened at Home Depot's Annual Meeting Matters (263 comments)

Comment Preferences

  •  let's outsource CEOs! (4+ / 0-)
    Recommended by:
    mattes, borkitekt, fastwacks, kurt

    I didn't see anyone diary this totally brilliant, hillarous, and utterly subversive Op-Ed that appeared in the NYTimes:

    COSTS are rising everywhere for American corporations, from energy to employee health insurance premiums. Yet in their drive to cut expenses, most notably by moving factories and call centers to other countries, they are overlooking the escalating cost of the executive suite. It's time to apply market logic to this disturbing trend and begin outsourcing chief executives. This measure would unlock tremendous value for shareholders.

    So far, outsourcing manufacturing and services has led to higher chief executive compensation, at the expense of shareholder profit. For example, I.B.M.'s chief executive, Samuel J. Palmisano, who has been moving jobs to India, last year saw his total compensation rise 19 percent to $18.9 million — even as the total return for his company's stock fell 16 percent.

    That's proof that globalization hasn't gone far enough. China, India and other emerging markets offer shareholders a virtually unlimited talent pool from which to draw chief executives. With an increased supply of candidates, a truly independent corporate compensation committee would be easily able to hire superior leaders at salaries and benefits that are a small fraction of what their American counterparts in those fancy corner offices demand.

    Several orders of magnitude separate the compensation of American and overseas chief executives; the Federal Reserve notes that while a typical American chief executive in 2004 got a compensation package 170 times greater than that of the average American workers, in Britain it was 22 times and in Japan 11.

    [...]

    Other critics might point out that while a chief executive's compensation package may be eye-popping to the average person, in terms of his company's total market capitalization, it is really quite modest. This is an excuse, not a justification.

    Current chief executive compensation creates what economists term a perverse incentive. An American chief executive, who is paid an average of $11.3 million annually, gets rewarded enough in one year to exceed the lifetime standard of living of 99.99 percent of the world's population. Even if he's booted from his job because of poor performance, he's set for life...

    link:

    The Corner Office in Bangalore
    By LAWRENCE ORLOWSKI and FLORIAN LENGYEL
    June 9, 2006

Subscribe or Donate to support Daily Kos.

Click here for the mobile view of the site