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[mainiac]

So it seems that back in 2006 congress passed some fairly low profile transparency laws meant to shed light on the way that CEO's get paid.  The results are mostly what you'd expect, friends on the board, hazy benchmarks that don't matter.  But one thing really struck me:

"researchers have found that about 90 percent of major U.S. companies expressly set their executive pay targets at or above the median of their peer group"

And that, ladies and gentlemen explains so much.  When 90% of companies try to pay their CEO's in the top 50 percent, what can we expect?

[andrea]

so, 90% of companies try to pay their CEOs above average pay?

That. Is. Crazy!

no wonder they are paid so much... what is the reason behind that?

[RedKing]

Recruitment. Nobody wants to go apply for a position and be told "Yeah, we underpay compared to all the other jobs like it."

I've ranted about CEO compensation enough this morning (see Sad thread and Occupy Wall Street thread), but I'll just leave it at this: it needs to be tied to long-term real-world performance. End of story. Until that happens, the pay spiral will continue and the reckless behavior by the Lords of Industry and Finance will continue.

[Zangi]

Corporate Pay Pyramid

There is a better pyramid somewhere... but yea, google gave me that.

[RedKing]

It gets better (not).

Even if you're a rabid free-marketer and argue that outrageous CEO salaries are just "the market determining a CEO's worth", that logic simply fails to hold water when a long list of CEOs are being fired and STILL collecting mad bucks. I thought "rewarding failure" was their chief bugaboo to argue against things like welfare...where's that attitude when it's corporate welfare?

[PsyberianHusky]

Speaking of the thread title do we have comparable data of what European CEOs are making?

[Zangi]

It gets better (not).

Even if you're a rabid free-marketer and argue that outrageous CEO salaries are just "the market determining a CEO's worth", that logic simply fails to hold water when a long list of CEOs are being fired and STILL collecting mad bucks. I thought "rewarding failure" was their chief bugaboo to argue against things like welfare...where's that attitude when it's corporate welfare?

Congratulations, you dun fucked up something fierce.  Here is your reward and don't you worry your little head, we'll cut down on the jobs to make up for it.

[RedKing]

Speaking of the thread title do we have comparable data of what European CEOs are making?

Can't find any recent data, but a slew of articles from back around 2006 show:

Average American CEO (2004-2006, companies with revenues of $10billion+): $13.3 million
Average European CEO (same criteria): $6.6 million
Average Japanese CEO (same criteria): $1.5 million

I'm not surprised. Europe has governments that are far more willing to intervene when things get ridiculous. And Japan has a corporate culture that focuses on the group instead of the individual. American corporate culture turns individualism into cult of personality, where some CEOs become 'rock stars' and command absolutely sick paydays because of it. Steve Jobs and Bill Gates being two examples of guys who actually earned theirs, even if it's still ridiculous.

[Leafsnail]

Is that before or after tax?  Obviously you'd end up with a greater difference if it's before...

[Vester]

so, 90% of companies try to pay their CEOs above average pay?

Wait

If 90% of companies are paying their CEOs above average

wait

Wait that's not mathematical

[Aqizzar]

My question is, "above average" what?  Considering the median (not average, median) combined household income in America is about $31k, I would be duly shocked if there was any number of CEOs making less than that annually.  If I ran so much as an incorporated gas station, I'd be paying myself more than that.

[Vester]

My question is, "above average" what?  Considering the median (not average, median) combined household income in America is about $31k, I would be duly shocked if there was any number of CEOs making less than that annually.  If I ran so much as an incorporated gas station, I'd be paying myself more than that.

I think "their peer group" implies other CEOs...

[RedKing]

Unknown, but I'd assume it's pre-tax.

@Vester: Yeah, that's kind of the point. All the boards are going, "Hey, our CEO isn't in the top 50% anymore! We better give him a raise." Hilarity ensues.

Spoiler: I'll let Xzibit explain more succinctly. (click to show/hide)

[Aqizzar]

@Vester: Yeah, that's kind of the point. All the boards are going, "Hey, our CEO isn't in the top 50% anymore! We better give him a raise." Hilarity ensues.

Spoiler: I'll let Xzibit explain more succinctly. (click to show/hide)

Yeah, I had a feeling that's what it meant.  It's still a mathematically impossible statement, but it's describing a self-perpetuating trend.  Good to know.

[mainiac]

so, 90% of companies try to pay their CEOs above average pay?

Wait

If 90% of companies are paying their CEOs above average

wait

Wait that's not mathematical

They aren't all paying thier CEO's above average.  Half are paying below the median.  But 90% of them intend to pay above the median leading to an endless cycle of escalation.