US CEOs Underpaid

cells

Aren't many paid in share options

eg you can buy 1 million shares for 50p if the share price hits £1 by the year 2017 or some such. Basically a reward for hitting a higher share price

the problem is how do you measure the impact of the CEO vs favtora out of theor control. I think some companies benchmark theor directors and ceo eg if you do better than these 10 comparable companies byou can get a bung of some sort ahare options or a bonus or whatever

Loughton_Monkey

Morrisainsco Supermarket Group made a £500 billion loss in 2014. The CEO was paid £5 million including bonuses. The remuneration committee recognises a formula for CEO success in terms of profit. They calculate Profit(YearX) divided by Profit(YearX-1) minus 1 as the correct growth factor.

Their new CEO made £750 billion profit. This translates mathematically to a growth factor of 750 billion divided by -500 billion minus 1. This = -1.5, or -150%.

Does this mean the new CEO should pay £2.5 million for the privilege of having worked there?

BobQ

How do you determine that what a CEO achieves is directly attributable to his actions? Most organisations succeed because of teams of individuals collaborating together to meet an aim set by its leadership. A CEO should provide leadership but I really doubt that any CEO can be judged solely responsible for the company profits or losses.

Is profit the only metric by which success is judged? After all Enron was fairly profitable in 2000. The success of a firm ought to be judged by longer term factors

Graham_Devon

You can't simply suggest any increase in revenues is down to the CEO of the company.

Just take one look at John Lewis. Their christmas adverts go crazy and are responsible for a huge rise in sales.

Is that the CEO's doing? No, it's the talent with the marketing and advertising team.

Same with the Meerkats. CEO's are not designing and coming up with all the adveritising idea - people much lower down the pecking order are.

If it's a genuine idea of a CEO which provides a fundemental change and profit increase, fair enough. But often it's pure luck, especially in todays connected world where a celebrity pictured holding your brand can be spread all over facebook and be fed to millions in an instant.

Sir Terry Leahy from Tesco was seen to be an extraordinare. But even he admits he was riving a wave of consumerism and surge in spending and debt. When the wheels of consumerism stopped with the financial crash, so did tesco's profits and it all started unravelling, even though all his grand ideas were still in place. It's these very grand ideas that are now being reversed in order to slow the losses at Tesco.

I'm not trying to take anything away from these people, but to suggest they are responsible for any rise in profits regardless is a bit much.

Mummyisbeauty

But surely since John Lewis is a partnership the employees, all of them I assume that are employeed direct by them, are in for a share of the profits, which incentivises them to work harder.
As for Tesco they expanded so fast in last decade that they now have fully built stores that aren't even staffed and most probably won't open.
I don't use them I have to admit because in general they seem more expensive.

Loughton_Monkey

Graham_Devon wrote: »

......If it's a genuine idea of a CEO which provides a fundemental change and profit increase, fair enough...

Glad you agree, Graham.

At a company I once worked for, the long serving canteen & cleaning staff were all canned, and replaced by minimum wage contract staff. We all had to pay 5% more for our pension, which was changed from FS to money purchase. Company cars were severely downsized. Overtime was banned.........

Profits boomed.

So even you agree the CEO deserved his large increase. Nice to know where you stand.

vivatifosi

Measured as change in share price?

Judging by this week's market jitters, are they about to get much "poorer"?

PasturesNew

They're slippery characters. If you directly link their pay to "performance" then they'll find a way to work the system. e.g. making a HUGE profit one year, followed by changing jobs as they know there's about to be a huge loss as they fiddled the figures.

A side effect of "increasing profits" is "paying the workers as little as possible", so you can increase profits by reducing the staff's overtime, perks and hourly rates. Zero hour contracts will do that. Indeed, it's really easy to kick the little guy so the one/s at the top (and shareholders) get to afford another dozen cases of Bolly at Xmas.

So any concept of where profit comes from and who is making it - and if it's real or fake are all artificial.

Top salary should have an additional link to lowest salary.

Generali

PasturesNew wrote: »

Top salary should have an additional link to lowest salary.

So the CEO of a company that employs cleaners directly should earn less than one that contracts the job to an outside firm.

Graham_Devon

Generali wrote: »

So the CEO of a company that employs cleaners directly should earn less than one that contracts the job to an outside firm.

A link to a salary doesn't mean "earn less".

A link could mean can't earn more then 20x or whatever the lowest salary. (Which would mean earning a measly £130 per hour).