Saturday May 26, 2012

JAPAN NEWS AND DISCUSSION

Chief executives are fond of saying “That’s the market system” when it comes to defending their remuneration package. What do you say?

Have Your Say Oct. 12, 2011 - 05:56AM JST ( 15 )

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15 Comments

2

Michael J. MorrisOct. 12, 2011 - 07:58AM JST

I don't doubt that some CEOs are worth the salary packages they are getting paid. Look at how Steve Jobs helped Apple become one of the most profitable companies in the US. He was worth whatever Apple was paying him, but I never read about his outlandish salary. But what kills me is when a CEO ruins a company, or bankrupts it and they still get these huge payouts, and seem to be able to walk into another job and demand even more. But I still feel that the president of a company should not be making 5000 times more than his average worker, there is no justification for that.
1

GWOct. 12, 2011 - 10:09AM JST

Clearly the "system" has been broken for about 30yrs, the highers ups have been bleeding companies, economies & countries, slowly but surely destroying markets for personal gain.

The global economy has been turned into a giant ponzi scheme, its needs to be fixed urgently or all hell is going to break loose, these ceo's & upper management who have been pilfering & destroying for THEIR short term gains need to reigned in, hopefully peacefully but I suspect we are going to be in for a rough ride & its these SOBs who figure substantially in the coming years!
4

JapanGalOct. 12, 2011 - 12:00PM JST

@Michael: Jobs took a salary of $1.00 a year, but his stocks made him like number 150 richest billionaires in the world. He would have been about number 5 if he did not sell out his original stocks when the board pushed him out.
-3

gaijinfoOct. 12, 2011 - 12:18PM JST

CEO's get whatever they are paid. It's up to the board of directors. Nobody's taking any company hostage or anything. If they paid them too much, and they weren't worth it, they'd go out of business. Business is business, it's not some charity out to get as much public approval as possible. If you are angry that they are getting paid that much, get over it. If you really don't like it, stop buying their products, and stand on the street with a sign convincing others to do the same. Good luck with that.
2

HumanTargetOct. 12, 2011 - 12:26PM JST

I wonder if their response would be the same if the market system demanded they take a pay cut.
5

LagunaOct. 12, 2011 - 02:20PM JST

Executive pay is generally determined by the company's board of directors - which in most cases just happens to be made up of executives of other companies. Is there a moral hazard when the compensation of those determining compensation will be affected by the result?

Rubrics for executive compensation are most often composed of two: who to evaluate against as peers; and at what rate to evaluate the given candidate. Peers are often poorly chosen: small companies will chose as peers executives from much larger companies. Rating evaluations are usually inflated precisely because to evaluate one's own executives as inferior to industry "peers" is to admit that the board is not doing its job correctly - this is called the "Lake Wobegone effect".

The results are that not disinterested people create an unrealistic group as criteria and then overestimate their own candidate's value against it. In 1965, the ratio of executive pay to that of an average worker was 42:1; it is now 475:1 - this compares to the Japanese rate of some 11:1. http://www.politifact.com/truth-o-meter/statements/2011/oct/10/facebook-posts/viral-facebook-post-ceo-worker-pay-ratio-has-obscu/

This is not the market; this is as rigged as anything could get.
3

LagunaOct. 12, 2011 - 02:26PM JST

Mea culpa - should have paid more attention to what I cited. The 475:1 ratio refers to the average when the stock market was peaking (it was 525:1 in 2000), but figures for 2010 put the ratio at 325:1 due to deflated stock options.
2

lostrune2Oct. 12, 2011 - 03:48PM JST

The problem with companies is they all correlate their CEOs' pay to the top tier companies' CEOs' pay, even if their own company is not one of those top tier companies. They don't correlate it to the middle tier companies. That's why even middle and lower tier companies pay out their CEOs like they're rich - they have these illusions of grandeur, gotta keep up with the Joneses!
3

FrungyOct. 12, 2011 - 09:17PM JST

Quite simply the problem with CEO's salaries is that they are both referees and players, in other words they both set the criteria for raises and are the beneficiaries of these criteria. This is frankly idiotic.
2

gonemadOct. 12, 2011 - 09:23PM JST

Laguna is dead-on with his comments.

One further observation: when we exclude those CEOs which were founders of the company or joined in the very early phases and only look at the CEOs of companies that have been established a long time ago (where "long time" has to be seen as somehow relative to the dynamics in the respective market), the remuneration of the CEOs seems to be inversely proportional to their achievements (the less they achieve the higher the remuneration). It's a purely subjective observation and I don't have numbers to back it up.
1

pawatanOct. 13, 2011 - 10:03AM JST

Look at how Steve Jobs helped Apple become one of the most profitable companies in the US. He was worth whatever Apple was paying him, but I never read about his outlandish salary.

What a prime example of how it should be! Jobs was paid the princely sum of $1.00/yr as JapanGal said. He made his money when his company made money an his stockholders made money. Isn't his job to make his stockholders money?

Too often we see these CEOs making princely sums for poor performance - if I don't perform in my job I get fired, they seem to get bonuses. Doesn't sound like the market system to me, sounds like a cartel of executives paying each other.
0

malfupeteOct. 13, 2011 - 10:13PM JST

Does anyone know what Jobs' salary was when he was with Pixar and Next? Probably not the $1 he was getting with Apple.

Corporate culture in the states basically rewards failure.. anytime a CEO is fired they get a nice severance worth several million dollars and tend to pop up at another company somewhere down the line. Carol Bartz, ex ceo of Yahoo.. did absolutely nothing for the company, didn't increase shareholder value and her claim to fame was having a sailor's mouth. I think she got something like $10 million when she was fired.

Its so true, these CEO's are directors of other companies.. which set the salaries for the executives. Definitely, scratch my back I'll scratch yours
0

NotthesameOct. 14, 2011 - 07:42AM JST

I say the CEO is lying. Its not the market system. What does that smokescreen really mean anyway? Nothing. Its a crooked system, not a market system.

It is simply physically impossible that any man could work ten times harder than an average floor worker. So there is no justification there. It is possible one man could be ten times more rare or more. But unlike working hard and creating actual output, that would not justify a multiple of a salary. A larger salary yes, same as other workers with unique skills get larger salaries, but when we start getting into a dozen times more, then its a crock. CEO salaries need a legal cap, and profits should be guaranteed to be distributed to workers in at least a token amount. Its workers that do the actual work that makes the profit, not CEOs and not shareholders (owners) either. I admit we need investors and CEOs, especially in the beginning, but as time goes on they are more and more like leeches and parasites. Meanwhile the workers work the same as ever.
1

yabitsOct. 14, 2011 - 08:01AM JST

Setting CEO pay reminds me of the joke that goes: "Q: Why does a dog lick between its hind legs? A: Because it can."

CEO's get whatever they are paid. It's up to the board of directors.

Yes, ever look at a board of directors? What are they made up of? That's right, other business executives who are often CEOs or former CEOs of other companies. I believe in Germany and some other countries, there is a provision or mandate that at least one board member has to come from among the rank and file workers.

Makes more sense than the current inbred system.
0

WilliBOct. 15, 2011 - 12:10AM JST

human target:

" I wonder if their response would be the same if the market system demanded they take a pay cut. "

Of course it is. They also get fired, without warning, and thei fabled stock options can become worthless. It is all part of the deal. Why don´t you rant about Hollywood movie start collecting outragous payment? It is the same thing, the market pays that much.