Skip to main content

Yeah, yeah, CEOs, you are all Gods and indispensable to the success of your company. You’ve made that argument year after year, no matter how often your companies failed — and the transcribers of press releases (formerly known as “journalists”) and the people you buy to do your bidding (we call them “politicians”) have bought this malarkey for so long that it’s allowed you to rob the treasuries of your companies. Problem is, a lot of the reasons lathered with bullshit about why you get paid obscene amounts of money are just plain false.

Gretchen Morgenson reports that the “market” argument to pay CEOs higher pay to keep them from fleeing to another company is false:

   But a study released last week pretty much drives a stake through that old “pay ’em or lose ’em” line — what you might call the brain-drain defense. It also debunks the idea that companies must keep up with the Joneses by constantly comparing their executives’ compensation with that of similar companies.

    This peer-group benchmark — how executive pay at one company stacks up against pay at another — is a big driver of ever-rising compensation. Boards say it helps them set pay based on what the market will bear.

    Well, maybe not.



Mr. Elson and Mr. Ferrere conclude, contrary to the prevailing line, that chief executives can’t readily transfer their skills from one company to another. In other words, the argument that C.E.O.’s will leave if they aren’t compensated well, perhaps even lavishly, is bogus. Using the peer-group benchmark only pushes pay up and up.[emphasis added]
You can check out the whole study she refers to. But, she fails to point out another key point. When I wrote my book “The Audacity of Greed” back in 2009, I had the good fortune to talk with Graef “Bud” Crystal who was once one of the country’s premier compensation consultants—the guy who would be hired by CEOs to come up with compensation packages. He told me back then:


“In 1970, one CEO hired me and said, ‘we don’t have a bonus plan and do we need one?’” recalls Crystal. “I did the study and I went back to the CEO and said ‘yes you do need a bonus plan. But we have a problem area. You are making $150,000-a year and the problem is that the $150,000 is equal to the salary and the bonus to what your competitors are paying so we have to cut your pay to $100,000-a-year and then we can put in a bonus.’” Crystal laughs. “It was like a scene from The Exorcist where ice formed on the windows…he started arguing about the findings and he finally said ‘let me say this to you this way: who do you think is paying your bills anyway?’ I replied, ‘If I recall correctly the checks were drawn on the corporate account, not your personal account so the shareholders are paying me, not you.’ The meeting ended quite quickly.
The point is the whole game is fixed. The CEO stacks his board with cronies, pays them $20,000-per-meeting board fees and, then, makes sure his cronies approve pay packages — the real money is in the pensions and deferred pay. It’s a scam

Originally posted to Tasini on Sun Sep 23, 2012 at 06:51 AM PDT.

Also republished by In Support of Labor and Unions.

Your Email has been sent.
You must add at least one tag to this diary before publishing it.

Add keywords that describe this diary. Separate multiple keywords with commas.
Tagging tips - Search For Tags - Browse For Tags


More Tagging tips:

A tag is a way to search for this diary. If someone is searching for "Barack Obama," is this a diary they'd be trying to find?

Use a person's full name, without any title. Senator Obama may become President Obama, and Michelle Obama might run for office.

If your diary covers an election or elected official, use election tags, which are generally the state abbreviation followed by the office. CA-01 is the first district House seat. CA-Sen covers both senate races. NY-GOV covers the New York governor's race.

Tags do not compound: that is, "education reform" is a completely different tag from "education". A tag like "reform" alone is probably not meaningful.

Consider if one or more of these tags fits your diary: Civil Rights, Community, Congress, Culture, Economy, Education, Elections, Energy, Environment, Health Care, International, Labor, Law, Media, Meta, National Security, Science, Transportation, or White House. If your diary is specific to a state, consider adding the state (California, Texas, etc). Keep in mind, though, that there are many wonderful and important diaries that don't fit in any of these tags. Don't worry if yours doesn't.

You can add a private note to this diary when hotlisting it:
Are you sure you want to remove this diary from your hotlist?
Are you sure you want to remove your recommendation? You can only recommend a diary once, so you will not be able to re-recommend it afterwards.
Rescue this diary, and add a note:
Are you sure you want to remove this diary from Rescue?
Choose where to republish this diary. The diary will be added to the queue for that group. Publish it from the queue to make it appear.

You must be a member of a group to use this feature.

Add a quick update to your diary without changing the diary itself:
Are you sure you want to remove this diary?
(The diary will be removed from the site and returned to your drafts for further editing.)
(The diary will be removed.)
Are you sure you want to save these changes to the published diary?

Comment Preferences

grytpype, SME in Seattle, Thumb, Alumbrados, Angie in WA State, Doug in SF, Joe Bob, Sylv, MadRuth, grollen, Subterranean, glitterscale, importer, Gooserock, Danno11, emal, bosdcla14, Shockwave, Sherri in TX, Wintermute, billlaurelMD, chuco35, SanJoseLady, meg, eeff, xynz, RFK Lives, Matilda, bostonjay, bookbear, hubcap, davelf2, eyeswideopen, Gustogirl, concernedamerican, TracieLynn, wonkydonkey, annrose, whenwego, ask, Time Waits for no Woman, Pithy Cherub, themank, mrblifil, bobinson, retLT, Alna Dem, sidnora, revsue, Quege, RLF, ammaloy, hopesprings, Getreal1246, psnyder, CalbraithRodgers, Sychotic1, defluxion10, Catte Nappe, lcrp, Sophie Amrain, zerelda, Curt Matlock, lonespark, marvyt, TexasLefty, rickeagle, sebastianguy99, Limelite, Gowrie Gal, Recovering Southern Baptist, maybeeso in michigan, bloomer 101, Tinfoil Hat, ichibon, subtropolis, stlawrence, chimene, democracy inaction, sc kitty, PBen, Militarytracy, KnotIookin, dewtx, llywrch, stagemom, YucatanMan, Dobber, Gary Norton, eru, owlbear1, Pam from Calif, Sun Tzu, jimstaro, skyounkin, Ice Blue, most peculiar mama, Steve in Urbana, markdd, Savvy813, bunsk, bookwoman, the fan man, Lindy, peacestpete, mightymouse, Alan Arizona, kathny, Paper Cup, bently, Jim R, Philpm, third Party please, Shirl In Idaho, BachFan, Kingsmeg, Mr Bojangles, tonyahky, seefleur, kestrel9000, Lefty Coaster, blueoasis, aloevera, gpoutney, Bush Bites, real world chick, happy camper, armadillo, Preston S, Spock36, ER Doc, middleagedhousewife, BlueMississippi, rage, BB10, fiddlingnero, means are the ends, Statusquomustgo, sea note, One Pissed Off Liberal, pgm 01, Ken in MN, Cronesense, Loudoun County Dem, byDesign, bfbenn, cobaltbay, FishOutofWater, terabytes, Calvin Jones and the 13th Apostle, newpioneer, bnasley, artisan, jedennis, mdcalifornia, jnhobbs, jhop7, carpunder, pioneer111, Wreck Smurfy, uciguy30, GeorgeXVIII, leonard145b, fallina7, madgranny, trueblueliberal, Empower Ink, JDWolverton, MKinTN, rogerdaddy, gundyj, mconvente, gfv6800, Mr SeeMore, wayoutinthestix, califdem, OleHippieChick, Sixty Something, Youffraita, Involuntary Exile, bythesea, elwior, lineatus, Akonitum, Its any one guess, monkeybrainpolitics, Lujane, tofumagoo, Cassandra Waites, catly, Liberal Of Limeyland, codairem, petulans, venger, DixieDishrag, BYw, Nica24, Robobagpiper, cactusflinthead, statsone, maggiejean, cameoanne, prettygirlxoxoxo, Bule Betawi, Kansas Born, arendt, Dirtandiron, divineorder, be the change you seek, Zotz, War on Error, shopkeeper, shalca, younglady, TheOpinionGuy, papahaha, Words In Action, Lefty Ladig, Railfan, brentbent, Broke And Unemployed, NJpeach, eXtina, archkcmo, womankind, Eddie L, pixxer, ItsSimpleSimon, Kristina40, DerAmi, Betty Pinson, DrTerwilliker, leu2500, science nerd, Oh Mary Oh, numi, Actbriniel, slice, Onomastic, Jasel, ozsea1, spooks51, afisher, sabo33, sostos, vahana, myadestes, ardyess, fishboots, Araguato, OhioNatureMom, lillyspad, Alice Olson, boomerchick, marleycat, zukesgirl64, sethtriggs, Jasonhouse, thomask, muddy boots, SueM1121, floridablue, whoknu, bluedust, VTCC73, diffrntdrummr, Hayate Yagami, jolux, SteelerGrrl, Mentatmark, ParkRanger, No one gets out alive, livingthedream, quill, Only Needs a Beat, stormicats, OldDragon, Heart n Mind, Mindful Nature, IndieGuy, ahumbleopinion, a2nite, 2thanks, Trotskyrepublican, Horace Boothroyd III, Mr Robert, chicagobleu, BusyinCA, Buckeye54, lunachickie, Kinak, George3, Marjmar, Robynhood too, Phoebe Loosinhouse, Prospect Park, mygreekamphora, DamselleFly, ebailey, countwebb, Eric Twocents, dennis1958, Neapolitan, SanFernandoValleyMom, SheilaKinBrooklyn, topazOR, howabout, Icicle68, Smoh, Jacoby Jonze, sparkysgal, OregonWetDog

Subscribe or Donate to support Daily Kos.

Click here for the mobile view of the site