I'm Angry at CEO Pay (and MBA's)

We all hear about top CEO's getting absurd compensation.  The average CEO pay in an S&P 500 company is in the millions.  With stock options, their pay can be many times that.

Even lower-level managers still receive pay far greater than those who they are supervising.  My question is: Why?  Why are we paying the people who actually DO the work in this economy less than those who stand around and WATCH people do the work?

I think that part of the problem is in the hordes of "middle management" people with MBA's (Master of Business Administration).  Why do we have so many MBA's running around doing nothing for the economy other than getting payed obscene amounts of money?  And why do we have the chief MBA, George W. Bush, running around Washington trying to enrich the MBA's even more?

Why can't SOMEBODY in Washington take a stand against this?  What does a CEO do that is 100, 200 times more valuable than what Joe Sixpack does?

I may be overreacting, but I don't see why the American worker is standing for being fiscally raped by bureaucrats and managers.  And I don't see why people keep attacking labor unions and other protections for the people who do work while supporting people who don't do the work.

And as this is more a "ranting" than a "discussion" diary, feel free to post your favorite "Obscene CEO compensation" story here.

•  A Useful Link

  Google News Search for "CEO" gives loads of examples.  Literally EVERY DAY you find out about another CEO getting absurd payment.  This is an example of "the death of outrage", they do it so often and so blatantly that nobody can get anywhere complaining.

  by Power on Wed Dec 29, 2004 at 08:30:10 PM PDT

  •  I ASSUME THAT'S YOUR TIP JAR, SO...

    there you go!

    by kosmologist on Wed Dec 29, 2004 at 09:22:25 PM PDT

    •  Not exactly

      I don't do tip jars.  I just happen to have the first comment in all my diaries with information that really could have fit in the diary itself, but I put as a comment instead.

      by Power on Wed Dec 29, 2004 at 09:25:50 PM PDT

      •  Sorry!

        I tipped you anyway. Nice job. You've sparked a good discussion.

        by kosmologist on Wed Dec 29, 2004 at 09:27:22 PM PDT

•  Topic on NPR Today

  Neal Conan covered the topic of CEO pay on Talk of the Nation today.  They were using the CEO and CFO at Fannie Mae as examples of problems with CEO pay.  After only 5 or 6 years at Fannie Mae and being forced to resign due to an Enron-like accounting scandal,  the CEO is walking away with millions of $$--one estimate was his retirement package would be worth $25 million.  

  by ethans mom on Wed Dec 29, 2004 at 08:38:54 PM PDT

•  You are overreacting

  You are overreacting, at least with the comment that middle managers don't do any work, they just stand around and watch other folks work.  That just shows that you have no idea what people do in the workplace.

  And the bit about MBA's getting obscene amounts of money. This MBA got paid $0.00 this past year. This MBA has been out of work for 14 months.  If you think I should be paid LESS than $0.00, I'd like to hear why.

  by Paul in Berkeley on Wed Dec 29, 2004 at 08:49:56 PM PDT

  •  I exaggerated

    I don't mean that managers sit around and say "Good job, do this".  No more than the Teamsters just sit around the snack cart all day.  It's called "ex-aggeration".  I'm talking about the people whose "work" is dealing with the other managers.  I'm talking about the 15 Vice Presidents at US Air.

    And of course not everybody is like that.  I'm taking a few egregious examples and painting a very broad brush.

    by Power on Wed Dec 29, 2004 at 09:07:52 PM PDT

    •  Very broad indeed

      Very broad indeed! But feel free to whack away at CEO's.  They richly deserve all the abuse we can dish out...especially the ones that keep their fat pay and perks while asking their employees to take cuts, or while laying off employees. Leadership starts at the top, and too few CEOs understand that.

      by Paul in Berkeley on Wed Dec 29, 2004 at 09:12:45 PM PDT

      •  The other advantage to MBA's

        The other advantage to referring to all MBA's is that George W. Bush is, as he will be glad to point out, the first president with an MBA.  It is the clearest connection to make between Bush and CEO's.  Any Bush-Enron connection is sufficiently obfuscated to not be easily seen.  This is simply "Bush is part of the MBA-culture having CEO's get huge salaries for lackluster performance while the real working Americans need to work multiple jobs just to get by."

        by Power on Wed Dec 29, 2004 at 09:30:25 PM PDT

•  You're absolutely right about CEOs, but a majority

  of MBAs end up in mid-five-figure jobs after raking up tens of thousands in student loan debt to pay for their allegedly lucrative degrees. There was a time when an MBA was a pretty certain ticket to a relatively comfortable life, but as with so many types of degrees the market is literally flooded with them now, and so their value is often questionable.

  by spot on Wed Dec 29, 2004 at 08:54:55 PM PDT

  •  They do the same to Unions

    How many unions are castigated by "people", generally the management-type, as being lazy, greedy, good-for-nothing anti-capitalist scum who are a drain on the economy and contribute nothing to the good of workers who are already getting payed too much?

    To deal with the problem at the top, we may have to attack the entire structure.

    by Power on Wed Dec 29, 2004 at 09:09:28 PM PDT

•  Very neat topic.

  I have an anecdote for you.

  A friend of mine goes to Harvard Business School.

  The first day of one of his classes, the professor asked: how many of you want to one day become a CEO of a big company?

  Half of the kids raised their hands.

  "See," he said. "They still aren't paying CEO's enough. This is proof."

  That's "MBA culture" for you. From day one, kids at these schools are taught that they're worth more than whatever companies are paying them, and that they should demand more and get more.

  Of course, I laughed my ass off when my friend told me the story. But it's sadly true, and it's going on in these schools every day. And it's breeding a very, very scary executive culture.

  p.s. Recommended.

  by kosmologist on Wed Dec 29, 2004 at 08:57:16 PM PDT

  •  I am being dumb

    but I don't get it. If there are too many people who  want to be CEOs, the oversupply should lower prices. What am I mising?

    by DrSpike on Wed Dec 29, 2004 at 09:11:17 PM PDT

    •  The point of the lecture was that

      if all these Harvard MBA's weren't sold on being CEO's, then CEO pay isn't high enough.

      This is an idiotic fucking argument, of course.

      Here's the easy refutation.

      Walk up to your best female friend.

      Ask her if she wants to be a prostitute.

      She'll slap you (unless she's prostitute...then...sorry!)

      You'll then tell her, "well, that just means prostitutes don't get paid enough."

      Here's the idiocy of this argument: it assumes that your best female friend would be a prostitute for some amount of money when, in fact, that's not the case; maybe, just maybe, she wouldn't be a prostitute no matter how much you pay her, because she's perfectly content being a doctor.

      Anyway, hope I clarified.

      by kosmologist on Wed Dec 29, 2004 at 09:21:26 PM PDT

      •  reminds me of a very bad joke

        but one that is illustrative of an important principle.   Please do not slap me, I am merely the messenger, not the originator.

        A man walks up to woman in a bar and asks "If I give you a million dollars, will you sleep with me?"

        The woman looks at the man, who's not too bad looking, has good teeth, and who doesn't smell, and answers "For a million dollars, sure."

        Whereupon the man puts a penny down on the bar and says "Let's go."

        The woman raises her voice in outrage and declaims "What to you think I am????"

        Whereupon the man responds "Madam, you established THAT with your answer to my first question.   Now we are merely haggling over the price."

        by teacherken on Thu Dec 30, 2004 at 04:57:41 AM PDT

  •  the business professors pay each other best too

    every school I've been to that publishes salaries has had the highest average and absolute pay in the business school.  There aren't that many business schools that are really worth going to, but the pay is high everywhere.  There are engineering profs that are pulling in a million a year in grants, supervise dozens of people, and still teach, and they aren't making as much as some guy that teaches 2 classes a year.  Something is wrong in this scenario.

    by unterhausen on Wed Dec 29, 2004 at 10:28:23 PM PDT

    •  Supply & Demand

      It's because, theoretically at least, those business profs can command more than the engineering faculty in the "open market".

      Even within a B-school, you'll notice finance profs make more than marketing profs make more than econ profs make more than management profs, etc.

      by thecarriest on Thu Dec 30, 2004 at 12:23:11 AM PDT

      •  Ironic...

        Considering the guys teaching business are the ones with an absolutely worthless degree.  People who actually know something should be making more money, than those who know a lot of total bullshit.  

        by Asak on Thu Dec 30, 2004 at 12:56:01 AM PDT

•  the inefficent CEO market

  If you want to understand the source of this problem, read Searching for a Corporate Savior: The Irrational Quest Charismatic CEOs by Rakesh Khurana. It is the most reality-based business book I've ever read (originally a PhD dissertation).

  by realitybased on Wed Dec 29, 2004 at 09:11:08 PM PDT

  •  to elaborate. . .

    The market for CEOs is inefficient because the pool of potential applicants is artificially constrained by the preconceptions of corporate boards. There are many contributing factors, but these are principle:

    1. Belief that to be a CEO one must have previously held a comparable position at a major competitor in the same field.
       
    2. Belief in the charismatic model of leadership.
       
    3. Belief that it is better to hire a CEO from outside a corporation than from within.
       
    4. Tendency for corporate boards to assume that they would know any qualified candidate, and to limit the field to cronies form the start.
       
    5. At the CEO level, corporate recruiting firms are not actually search firms. Their role is purely to intermediate in the courtship process.
       
    6. Board obsession with how the business media will react to the appointment, and investor responsiveness to the media framing.

    by realitybased on Wed Dec 29, 2004 at 09:33:43 PM PDT

•  Getting people to tolerate great wealth in others

  has been studied by the corporate elite wealthy and an article in May 2000 Harpers had a remarkable piece.  It radicalized me.  I am a newbie here couldn't seem to get the link embedded, but here is the url:  http://www.findarticles.com/p/articles/mi_m1111/is_1800_300/ai_61856256.  

  by kathika on Wed Dec 29, 2004 at 09:17:20 PM PDT

  •  That has got to be the most repugnant

    piece of writing I have ever read.  I was just aghast.  Now Bush's policies seem even clearer.

    by dnn on Wed Dec 29, 2004 at 10:06:38 PM PDT

  •  That's dated APRIL FIRST!!

    So, please note that it is a piece of (sadly too accurate) satire.

    That's the problem with web searches - it's way too easy for articles to lose their context.
    

    by Robespierrette on Wed Dec 29, 2004 at 10:24:25 PM PDT

  •  Its a spoof

    But a dang good one and a dang good read. I didn't get it until I read the date.

    by ex republican on Wed Dec 29, 2004 at 10:41:53 PM PDT

    •  This is not a spoof

      The article was in May 2000 of Harpers magazine with the explanation that Nick Bromell received the letter.

      "Nick Bromell, the accidental recipient of this letter, is the author of Tomorrow Never Knows: Rock and Psychedelics in the 1960s, to be published next fall."

      by kathika on Thu Dec 30, 2004 at 10:21:47 AM PDT

      •  Harpers is a serious magazine

        and they would not publish this as a spoof.

        by kathika on Thu Dec 30, 2004 at 10:31:51 AM PDT

  •  to imbend the link

    enclose what you want to use as the link, followed by a single space, followed by the url between two square brackets  

    I have taken the liberty to do your link  as follows

    [   --   to demarcate the link
    here -- to be the link that appears
    url  - to provide the actual link
    ]  -- to close the link

    here  

    by teacherken on Thu Dec 30, 2004 at 05:01:21 AM PDT

•  Does anyone think it's

  a coincidence that average CEO pay in relationship to average worker wages/salaries has grown rapidly during the same period that union workers as a percentage of the workforce has declined?  Once they emasculated worker organization and solidarity, they became free to take advantage of workers and that means that they can demonstrate (or in some cases on promise) greater profits and consequently, must be rewarded.

  by Marie on Wed Dec 29, 2004 at 09:19:45 PM PDT

  •  Yup, we're back-sliding. . .

    We're headed back to the days when railroad tycoons savored wealth produced by the sweat of practically-enslaved immigrant labor.

    Maybe they'll shoot for the Feudal Era next? But no, there's too much responsibility involved in that - you might be expected to actually feed or clothe your serfs.

    by Robespierrette on Wed Dec 29, 2004 at 10:29:07 PM PDT

•  Tournament theory

  
  No one is paid what they are worth; they are paid a prize ludicrous enough in size to motivate a Bayes chain of hundreds of thousands of corporate "tools" to do whatever it takes at one another's expense to claw and elbow, stomp and stab their way into the title game.

  Most MBA's don't get jack, and most MBA candidates are lured into the (effectively fixed) game by the 'average' salary of an MBA --- which is lofty, but highly skewed thanks to the tournament setup.

  Sure, it's a bump in pay; hey, I've got an MBA.

  But without a chain of unbroken victory in 'the tournament' at a large corporation, an MBA is nothing more than another "tool" with a sheepskin, albeit a gilded one.

  Thing of it as a March Madness from Hell that never stops...one in which Dick Vitale and Bill Raftery never. shut. up.

  Signed,

  a recovering tool. :)

  by cskendrick on Wed Dec 29, 2004 at 09:27:24 PM PDT

•  I don't know how to do the box, but check this out

  "The National Enterprise Initiative (NEI) was founded in 1973 by the economists, businessmen, and academic experts who crafted the policies that led to the electoral victories of Ronald Reagan and George Bush and that culminated in the sweeping victories of Newt Gingrich and a generation of younger Republicans. Few outside this circle know that these policies had their inception in the brilliant theorems devised by Professor Lawrence Eucher at Harvard's Center for Wealth and Public Policy. Now known within NEI as "Eucher's Law," these theorems postulate that:

  • Public wealth tolerance rises in direct relation to the degree of wealth accumulated by individuals. Conversely, wealth tolerance is eroded by public perception that wealth is accumulated by institutions.

  • Public wealth tolerance becomes wealth respect as individual wealth approaches $150 million.

  • Wealth respect becomes wealth awe as individual wealth surpasses the level of $1 billion."

  Back to me:  It's not an accident that there is no outrage at the difference between CEO pay and the average worker now, even though it has become approximately 25,000 times the average worker.  It's obscene.

  by kathika on Wed Dec 29, 2004 at 09:28:11 PM PDT

  •  How to do the block

    <div class="blockquote"> TEXT </div> will get you the nice text block.

    And yes.  When the numbers get that big, the normal rules no longer apply.  It's simply a matter of who is more outrageous.

    by Power on Wed Dec 29, 2004 at 09:32:41 PM PDT

    •  Absolutely

      Thanks for the instructions.  Some more:

      In sum, the more Americans are told about the capital accumulation of individuals, the more tolerant of wealth accumulation they become. When they read that Yankee shortstop Derek Jeter might earn more than $118 million, or that an Internet venture capitalist reaped $800 million with his IPO, their wealth respect rises and their wealth envy falls.

      It blew my mind that they figured this all out back in 1973.  Whew, I'm not surprised they figured out how to grab power in every branch of government!

      by kathika on Wed Dec 29, 2004 at 09:39:23 PM PDT

  •  April Fool's. . .

    . . .look at the date on the article.

    by Robespierrette on Wed Dec 29, 2004 at 10:31:05 PM PDT

    •  This is not an April Fool's letter

      If you read the whole article, it shows that the "author" received this letter.

      "Nick Bromell, the accidental recipient of this letter, is the author of Tomorrow Never Knows: Rock and Psychedelics in the 1960s, to be published next fall."

      by kathika on Thu Dec 30, 2004 at 10:19:56 AM PDT

      •  I have e-mailed the author

        and asked him if it is an April Fool's joke.  I don't believe it is, and I want to clear this up.

        by kathika on Thu Dec 30, 2004 at 10:46:22 AM PDT

      •  The author, Nick Bromell, responded

        and said

        Well ... it was not a real letter. The article is a parody. You may be
        comforted to know that some of Eucher's laws and theorems have begun to appear in professional economics venues ... reality imitates fiction, though in this case the fiction was just a slight exaggeration of what we can actually see. alas.

        So I was mistaken in accepting it as real!  However, there is obviously more than a kernel of truth to it.  Wow, I guess I am a bit gullible... it must come from seeing what's really been happening in our world.

        by kathika on Fri Dec 31, 2004 at 01:14:53 PM PDT

•  The solution

  The solution is to run companies like governments, this way the workers get an equal to vote on all salaries in a democracy. The CEO's salary should be merit based just like with every other worker. This meaning everyone in the company gets equally rich, with the hardest workers making the most money.

  by Lucian on Wed Dec 29, 2004 at 09:36:33 PM PDT

  •  Bad idea

    "with the hardest workers making the most money"
    Have you ever seen an organization (government, NGO or company) where that ever happens?  Me neither.

    Another reason is that governments are not designed for efficiency: http://www.dailykos.com/story/2004/12/23/214021/92 -- they still have an important role to play, though.
    

    by alexb on Wed Dec 29, 2004 at 11:51:44 PM PDT

    •  Neither are companies

      But Democracy would help companies remain responsible

      by Lucian on Thu Dec 30, 2004 at 12:31:36 AM PDT

•  Here is my diary on this

  It's about who should own the corporation. I think the employees should.
  http://www.dailykos.com/story/2004/12/17/18135/128

  by Lucian on Wed Dec 29, 2004 at 09:42:22 PM PDT

•  Over simplification

  
  Its not the degree, its not the job, but rather the motivation of the person who holds said job/degree.  You attack the institution of crony capitalism, yet pick a very small aspect of the institution as your target.  CEO pay and MBA pay compared to work load varies tremendously across various industries, firms, states, and economic systems.

  Middle managers (MBAs or not) can be a very positive force for change given the correct motivation.  If you are so incensed about the state of our current sort of economic system, work towards changing the system rather than the individuals who merely play their part.  I think attacking those middle managers will only reinforce their current motivation.  It's a culture of a certain sort of competition, accumulation, and status that you are after, not those who take advantage of the system.

  As you ask your very interesting question, maybe you should be asking yourself whether you fit into the same cast as those middle managers.  How do you approach competition, accumulation, and status in your work and life?

  And no, I am not a MBA/middle manager.
  

  by linc on Wed Dec 29, 2004 at 09:48:56 PM PDT

  •  No, it's taking advantage of the system

    It's a culture of a certain sort of competition, accumulation, and status that you are after, not those who take advantage of the system.

    There are problems that range from common decency (execs of a money-losing corporation granting themselves huge bonuses while forcing workers to take pay cuts - for example, nearly any airline in recent years) to abusing corporate governance (the CEO gets his friends on the board; often they're the CEOs or officers of corporations where he sits on the board) to inverted incentives (granting bonuses and stock options when the company is performing poorly or excessive golden parachute arrangements in the rare instance a CEO is forced out - Franklin Raines at FNM is just the latest example).

    None of those things are beneficial to corporations, capital markets, the economy, or ulitmately the security and stability of the country.

    And I'm not an MBA or middle manager either (although I have been an engineering manager) - I own the company that provides all of my income. If my company doesn't make money, neither do I.

    by badger on Thu Dec 30, 2004 at 01:26:54 AM PDT

•  It's ridiculous!

  I can't understand why more people aren't all fired up about this!  And while I'm on the subject of disgustingly high salaries, what about professional athelets and celebrities?

  Who the hell needs that much money?

  by Street Kid on Wed Dec 29, 2004 at 10:03:05 PM PDT

  •  I always felt I had to accept it if the market

    paid a lot to these people (such as athletes and celebrities), but I get angry when I realize they are now getting larger tax cuts and are not carrying their fair share of the tax burden any longer!  It angers me that Grover Norquist and his like are convincing people that there is no moral lapse involved when rich get richer and poor get poorer.  Why don't we see moral outrage in the mainstream media?

    by kathika on Wed Dec 29, 2004 at 10:35:43 PM PDT

    •  Possible explanation

      The owners of sports teams and celebrities (thru ads for movies) take out a hell of a lot of advertising space!

      by Street Kid on Wed Dec 29, 2004 at 10:49:39 PM PDT

•  Guardians

  CEOs are Guardians: http://www.dailykos.com/story/2004/12/29/22531/686

  The bigger a company, the more it acts like the military (isn't the word 'company' used in the military too): capturing market share; hostile takeovers; white-knights (a 3rd party that helps fend off a hostile takeover).

  CEOs should follow Commercial Morals, http://www.dailykos.com/story/2004/12/26/23257/078 but instead use some sort of hybrid.  

  "Why can't SOMEBODY in Washington take a stand against this?"  They have corrupted their Guardian Morals by selling out: http://www.dailykos.com/story/2004/12/23/214021/92

  (Now this is an obscene diary-whoring story, not a CEO compensation story, but they can't be THAT different, can they?)

  by alexb on Wed Dec 29, 2004 at 11:46:05 PM PDT

•  Return on Slack

  
  Perhaps I should join the Church of the Sub-Genius, because my uttermost value is discretionary time. In other words, slack.

  What motivates me at work or play is solving puzzles that save me time, and therefore give me more slack, some of which I invest in solving more puzzles that save me time, therefore giving me a return on my slack.

  Time is my money. What I earn or do is valuable insofar as it earns me time.

  What I would love to see arise in an economy in which individuals and organizations were rewarded and punished based on their net product of time.

  The manager who handles the getting of information from other department, of arranging valuable meetings, getting staff appropriate gear for their work is one who generates time, and therefore is worthy of a bump in pay. There's a lot of housekeeping BS in a corporation; that sort of service is what good managers do, and bad managers delegate. It's called management.

  Likewise the worker who innovates and creates either a new service or a means of performing an existing role, thus generating time. Throw that person a bonus.

  The reverse cases are also present, and should be sanctioned; the bane of Weberian organization, too many meetings, should be vanquished, and all managers who call too many meetings should be sent into exile, never to return...that is, until they are ready to play nice and be with people in appropriate doses and formats. :)

  Likewise, the worker who blows off assignments, leaving the tasks for peers to perform, or doesn't bother informing internal customers that they aren't going to make that objective, is wasting other people's time.

  That would be cutting into my slack, and by golly, I won't stand for it.

  Slackness = Sound Business

  As corny as all this sounds, the fundamental mathematics of commercial civilization is based on the two-way conversion of between the value of time and money. Think of it as physics for finance.

  Things to Do to Protect and Expand Your Slack

  1. Pay yourself sufficient hours of sleep.
  Being sick and foggy-headed when awake cuts into your slack. Sick and foggy people have to spend more slack maintaining personal and professional relations, and performing routine tasks. Solving those puzzles that earn you more slack become more challenging. Further, sleep deprivation makes a person error-prone, and that can lead to slack-damaging consequences such as extended work hours, reduced likelihood of raises and promotions (which can get you valuable resources to convert into slack), and bad judgment calls that eat into your slack and that of others, at which point you run into the ultimate slack risk: the need to spend time finding a new job.

  2. LIVE at work. Regardless of your actual work hours or the mode of same, the chief driver of slack production is your occupation. Most organization are incompletely aware of the principles of slackness, therefore leaving you opportunity to appropriate your producer surplus of slack in real time.

  Many of you are doing this already: fun conversations with peers, a little computer game action on the side window, some Kos conversation when there's an off moment (or hour or two) in the work cycle. If you did not do your job as evaluated in terms of physical, service or data output, you'd be spending slack finding a new job.

  On the other hand, companies have an empirical understanding that happy workers do two things (a) they come to work, at which point they are more tractable, and (b) they don't demand quite so much in the form of wages, salaries and financial benefits. Companies are negotiating for their cut of slack, too, some more astutely than others, but all are aware that something is going on, even if they don't quite get it.

  Now, in a true slackness-minded enterprise, your net production (and consumption) of slack while on the premises would be much more closely monitored, but the good news is that you, as a lifelong expert of slack, would find your compensation and promotion prospects skyrocketing. Cool, huh?

  3. Diversify your income It's great having a job, splendid having a nice-paying one. But only one income source is problematic. You need backup. Find ways to invest some of your time in projects that yield a high return on slack later on; crafts that lead to other, interesting occupations, even inventions and business ideas, mingling in places where ideas are generated. (I make no bones about it, I'm a big fan of random conversations in bars and coffee shops.) Invest some slack to widen the scope of your aspirations for more slack. Get in the habit of using some of your slack to work on ways to own your own business, to sock away slack for later on when you will really want it -- for your retirement, or just recreational daydreaming about how to...

  4. Generate Slack for Others. You want friends, wealth, influence, power, more slack? Then share the wealth -- save other people time, give them discrete quantities of more of their own lives, and they will not only be grateful but generous. You cannot buy the gratitude of wealthy, powerful, influential and slack-saturated persons.

  But all are appreciative of more slack, more time.

  The simplest way is to not waste people's time...

  ...which suggests that this post is over. :)

  by cskendrick on Thu Dec 30, 2004 at 06:02:33 AM PDT