Everyone knows that chief executives at public companies are overpaid by the corporate boards they keep in their hip pockets. Afterall, the Pulitzer Prize winning New York Times business writer Gretchen Morgenson tells them so every chance she gets. In fact, they are so overpaid that a lot of them are fleeing to privately held companies…obviously out of embarrassment at their ill-gotten gains. Or, you know, maybe not.
Here's Steven Kaplan writing on the Harvard Law School Corporate Governance Blog:
Consider what this exodus of talented public company executives to private equity-funded companies means. These executives can certainly get hired as CEOs of public companies. If they were so overpaid, they would not leave the public companies. The fact is that many of them are leaving to run private equity-funded companies.This also suggests that CEOs do not control their boards and get the boards to overpay them. On the contrary, the fact that CEOs are leaving suggests that public company boards may not be paying their good CEOs enough. I am encouraged because it may finally have become apparent, even to the New York Times, that U.S. CEOs, boards, and corporate governance are subject to market forces. In addition to the fact that public-company CEOs can earn more as private-equity company CEOs, here are a few additional observations that suggest that the criticism of CEOs and boards may have gone too far.
Are CEOs of U.S. Public Companies Really Overpaid? [HarLaCorGov blog]
Posted by Gagan Rav Satyaketu, Jan 21, 2007 9:00PM
They thing with a statement about CEOs being overpaid is in the definition of overpayment. Are theses CEOs being paid for bringing and improving business and thereby increasing shareholder value or are they being hired because of other factors ( as in the case of two seemingly "non performing' former GE execs).
As a former VP of International Operations as well as a business owner, I can attest to the fact that the stated compensations one can peruse in the media regarding current CEO compensation are obsene. With some packages over the 100 million mark, for maybe five years of negligible performances one has got to question what was the value added by this individual to warrant such a payment. In most cases, they come up with some archaic B school POAs that disregard one of the fundamental rules that the great innovators and entrepreneurs from yester-years observed and made this county the great country it is..."keeping ones ear to the ground".(Bear in mind however that not all CEOs are in this category).
With todays "CEOs" we have performances and 'great plans' as well as the "managers' that know exactly what needs to be said to keep their jobs without a care for the resulting poor performances and the people that are negatively affected. Now we have other countries leaping forward in productivity, profits and morale,with staff making sacrifices and doing what it takes ,ethically to improve their portfolios and international standings.
What is indeed unfortunate is the atmosphere of abject fear and arrogance that is pervading our corporate world, which at the end of the day prevents those who can actually make a difference from implementing the appropriate strategies to achieve this objective.