Ship of Fools: "We need to pay that to get people of the right calibre..."

Thread: "We need to pay that to get people of the right calibre..." Board: Oblivion / Ship of Fools.

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Posted by EtymologicalEvangelical (# 15091) on :

This is the argument that justifies shelling out small fortunes, not only to CEO's of private companies, but also of public bodies, such as County councils.

To be honest, I get really pissed off when I hear this argument. Although I understand the way the free market works, it seems to be based on the argument that "if we don't pay this amount to that person, then he / she will leave". My response is almost always: "Then let them bloody well leave, and find someone who is willing to do the job for a sensible salary."

I can't understand why someone, who needs to be bribed with an obscene level of remuneration in order to do a decent day's work (if indeed such people do 'decent' work!), should be termed "a person of high calibre". Whatever happened to "moral calibre"?

Why can't workers in an organisation be promoted to the highest levels, who would be happy to take a pay rise that amounts to a salary far less than that of the head-hunted executive?

This argument - so loved of the political right - is actually quite vacuous (and I wish it could be comprehensively refuted within our public life). If we trained our staff properly and encouraged promotion within organisations, then we would not need to rely on a relatively few "super-execs" who float around the system with an air of entitlement, without whom apparently our society would fall apart.

As far as I am concerned, this is a form of parasitism (of an extremely dangerous kind).

Am I wrong?

Do let me know...

Posted by Boogie (# 13538) on :

No, you are absolutely right.

There are plenty of good people who can do those jobs. No way do such obscene salaries need to be offered. I think there is some kind of 'divide and rule' going on. They want super rich and super poor levels in society.

These organisations simply need to try it. Offer a good, high-but-not-obscene salary, then see who applies.

There will be no shortage of excellent candidates I am sure.

Posted by Penny S (# 14768) on :

I always wonder what these people actually do all day.
I had a brother-in-law who was headhunted on occasions - but it was as a systems analyst who was known to be effective at analysing systems. I'm not sure exactly what this entails, but am aware of it as an actual task with observable outcomes.
CEOs, now, I have absolutely no idea what they do. Presumably, on arriving at a new organisation, task one is to familiarise themselves with the various divisions. Then to meet the heads of each division and familiarise themselves with the daily activities of each division. I assume they are presumed to have the nous to look at the results of these investigations and see how the work of each division can be done better.
It is odd how often this seems to be by looking at the lowest level of employee, cutting their hours and hourly pay, and making sure that they don't have the employment rights laid down in law. "Oh look, we can economise by cutting out the time allocated for cleaning the cookers. And we can remove the allowance for the cleaning of the uniforms at home, while not providing any laundry service ourselves. And we can provide really cheap cleaning materials without checking that they can do the job through this exclusive arrangement with a subsidiary, and threaten any staff who provide their own materials to do the job better with the sack." (Based on real cases in an educational establishment, relying, presumably, on knowing that women have a loyalty to the place and will do a proper job, even outside the paid hours. And are not unionised.)
A really effective parasite will ensure that the host organism can survive to provide for future generations.
I'm not sure that this "elite" have worked that one out.
And I'm not sure why someone flown in from outside without any real knowledge of the business is better than someone who has risen through it.
I was wryly amused (not quite the word, but it will do) when some members of the ruling group accused the lower orders of having a "sense of entitlement". Entitlement to benefits contributed to over years is somehow subtly wrong, when unworked for entitlement due to birth in a privileged class is not even seen as such.
Roll on rules that limit the top salary to a reasonable multiple of the lowest. As if...
Perhaps the Rowntree group could work out what is needed for a living wage at the top - I was interested to see that they allow £50 for a child's birthday party in their living wage at the bottom calculation - seems a lot to me. But I don't think that there can really be a need for two homes in the UK, one abroad, a private jet, a personal yacht which can be mistaken for "My Little Liner" and eating out at Michelin starred restaurants several times a week - not if those men (usually) are really working so ****** much harder than the cleaners. When would they have the time to use them?

[ 02. November 2013, 10:04: Message edited by: Penny S ]

Posted by Hairy Biker (# 12086) on :

It's all about justifying your own obscene salary. If you "can't find anyone good enough" to work for you on less than a couple of million a year, then you must be worth at least 5 million. Your boss thinks the same way, and you know you'll have his 10 million one day if you play your cards right. It's about people with power looking after their own in their own interest.

Posted by Albertus (# 13356) on :

Yes, it's complete bollocks. We see it in my sector, higher education, where v-cs' pay and pensions have shot up. But in this sector at least, anyone who was really any good at it wouldn't, by definition, be primarily motivated by money, while anyone who was primarily motivated by money would either not be any good at it or, if they were, would have buggered off into the private sector, to be paid £500k rather than £250k a year, ages ago.

Posted by rolyn (# 16840) on :

The super-rich culture that has developed under capitalism is all very well if sufficient crumbs fall from their table to sustain the less fortunate.

If however it is allowed to foster the arrogance of the rich , seen shall we say pre reformation, or pre WW1 ? Well you can bet it will end badly at some undetermined point in the future .

Posted by Enoch (# 14322) on :

I agree, but there's an extra issue.

These days, these characters are treated more like football managers.

They are hired on huge salaries, and are supposed to deliver results, the equivalent of promotion to the next division. They're regarded as only as good as the equivalent of the last match, be it getting a big road scheme built or reducing the number of deaths on the operating table by x%. If they don't do it, they are fired, except that - for entirely proper reasons - they have employment rights and so must be paid to go away.

In the good old days that everyone looks back to, the average chief officer had risen through a clear career structure, and was expected to give their full commitment to the organisation, probably until they retired. They got a good but not spectacular salary, but there was also a structured pension scheme that rewarded long service, and a system for compensating people who had to be retired because of restructuring, amalgamations etc at a stage in their career when they were past the point where they could get another comparable job. In return also, the organisation accepted it owed a commitment to them.

That rewarded reliable, responsible but sometimes complacent and slightly dull, people.

It is a value judgement whether you think your major public bodies are better run by the reliable, responsible but possibly dull, or by flash whizzos who are in love with change and think perpetual revolution is not just fun but essential to keep people on their toes. But the way you recruit, pay and get rid of your chief officers will determine which sort you will get.

Posted by agingjb (# 16555) on :

Rich people are motivated by promising to pay them more; poor people are motivated by threatening to pay them less.

(I find this regrettable, but I fear that I'm often in a minority.)

Posted by TurquoiseTastic (# 8978) on :

Well, the Prime Minister gets about £150,000 a year. That is a pretty big salary, but I think it is more or less justifiable since he has a pretty important job. It carries a certain level of responsibility I think it is fair to say, like declaring wars or not, launching nuclear missiles, deciding whether to privatise the health service, generally running the country and other minor things like that.

Apparently banking CEOs etc. are so important that they need to be paid about ten times that amount. I guess they must have really big responsibilities then.

Posted by Arethosemyfeet (# 17047) on :

The only thing I would say against this argument is to give the example of recruiting headteachers, particularly in primary schools. Teachers' pay is generally pretty good, at or slightly above full time average earnings. Headteachers get paid more (maybe 20-40%), but their responsibilities and skills, with accompanying stress levels, are much higher than those of a classroom teacher. And a bad head makes a school a hellish place to work or learn. When our current head retires we will likely have immense difficulty recruiting, even more so that we do for classroom teachers. What should be done to ensure we can recruit someone competent? Is it always unacceptable to increase pay? Would we not need to see a drastic change in society to reach a point where the money paid for a job is not seen as at least part of the measure of how important a job is and how valued is the person doing it?

Posted by Doc Tor (# 9748) on :

quote:
Originally posted by Arethosemyfeet:
The only thing I would say against this argument is to give the example of recruiting headteachers, particularly in primary schools. Teachers' pay is generally pretty good, at or slightly above full time average earnings. Headteachers get paid more (maybe 20-40%), but their responsibilities and skills, with accompanying stress levels, are much higher than those of a classroom teacher. And a bad head makes a school a hellish place to work or learn. When our current head retires we will likely have immense difficulty recruiting, even more so that we do for classroom teachers. What should be done to ensure we can recruit someone competent? Is it always unacceptable to increase pay? Would we not need to see a drastic change in society to reach a point where the money paid for a job is not seen as at least part of the measure of how important a job is and how valued is the person doing it?

The thing about being a headteacher is not the pay, it's the work - which to a lesser extent, that applies to teachers, too.

Recruiting headteachers would be significantly easier if they weren't expected to be in charge of absolutely everything that happens in the school: in charge of the teachers and teaching, yes, but why, for the love of God, do we insist they also be experts on plant, finances, IT and HR? They trained as teachers, not managers, and nine times out of ten it shows.

Pay them less and hire a couple of decent managers to do all the non-teaching stuff.

Posted by Arethosemyfeet (# 17047) on :

I would say it's not the amount of work so much as the responsibility (most large schools do have finance managers, and HR up here is dealt with by the council). As a head you're the one who has to deal with (usually unjustly) irate parents while maintaining the confidence of the wider community, you have to support your staff publically and correct the things they've screwed up privately. Like it or not the number of people who can do that job are limited, and the number of people so saintly that they will use their skills as a head when they can get paid double for using them elsewhere is tiny. I also don't think that you could find suitably skilled finance specialists for low enough pay that it would be more effective at aiding recruitment than raising pay.

It is a fair point though, and I think probably the crux of the issue, that our society has created "super jobs", so to speak, that require exceptionally talented people to do well, rather than larger numbers of jobs that can be done by skilled but not exceptional people. I'd be interested (make that very interested) to see a school run more egalitarian lines.

Posted by Raptor Eye (# 16649) on :

I think that it's an insult to those who have put their all into their work to be told that their pay will not keep up with inflation at the same time as the so-called leaders hike up their own perks.

Those I have had the misfortune to observe relied on those who knew the industry, relied on loyalty, and relied on it that people cared, while they had none of these qualities themselves and saw them as weaknesses to be exploited.

While flair and experience are desirable attributes, and the point that someone who has limited experience over a long period may be dull is taken, the kind of exorbitant benefits and 'golden handshakes' given to some who don't need it at the expense of others who do is obscene imv.

Posted by Felafool (# 270) on :

What do CEOs do? Why are they worth the huge salaries? Reminds me of the 3 envelopes. [Biased]

Posted by Felafool (# 270) on :

3 envelopes (For those who don't know the old story.)

Posted by Adeodatus (# 4992) on :

What we really need is some proper, high-quality research into the question.

Now, who has enough money and will step forward to fund it ...?

Posted by Og, King of Bashan (# 9562) on :

Re: what CEOs do, I am also sometimes guilty of rolling my eyes at business speak, but consider a few things.

Have you ever started a business and attempted to implement a business plan? It sounds like something they tell you to do that isn't all that important, but if you don't have a plan for how you are going to reach, obtain, and keep customers, you are going to fail. Not everyone is set to do this. I have known a number of people who have tried to start out on their own, and find that their particular gifts are best suited to working in someone else's organization.

Have you ever been at a job when the CEO or boss changed? Did anything chance? Did it all go smoothly, did things start running better, or did this person's personality and skills cause you to start hating your job? A good boss is a great thing, a bad boss will drive you from a secure job.

Have you ever been a leader in an organization? Have you experienced that moment when someone inside the organization does something incredibly stupid without the aid, encouragement, or even knowledge of the organization and you are the one who has to clean up the mess? It sucks, but that's your job? Whose job is that in your company?

So sure, you don't see what the CEO does every day, but you experience it in action. The difference between a good boss and a bad boss to you, the worker, means a whole lot.

Posted by LeRoc (# 3216) on :

quote:
Og, King of Bashan: The difference between a good boss and a bad boss to you, the worker, means a whole lot.

Yet, I have the feeling that there are many bad bosses who are exorbitantly paid. Paying these amounts in order to have a 'good' boss doesn't seem to work.

Posted by SusanDoris (# 12618) on :

I think the OP is absolutely right, and maybe, just possibly, one day the system mightchange, but I am decidedly not optimistic about it.

Posted by Sighthound (# 15185) on :

I remember the argument being made in Local Government that in order to get the 'right sort of person' top-level pay needed to be significantly increased. The subtext was that people needed to be brought in from outside the culture, especially from private industry, since the management of UK private industry is known to be oh so superior. (irony).

Anyway, some of these bods were attracted, who knew sweet FA about the job and cared less. I cannot say that I have noticed that the efficiency of Local Government has notably improved compared to what it was in (say) 1975. However, the salary of the top bods has certainly risen a good deal in real terms.

Posted by Jay-Emm (# 11411) on :

quote:
Originally posted by Og, King of Bashan:
[QB] Re: what CEOs do, I am also sometimes guilty of rolling my eyes at business speak, but consider a few things.

Have you ever started a business and attempted to implement a business plan?

But most CEO's weren't at the startup. Especially at the places with that reputation.

quote:

... and you are the one who has to clean up the mess? It sucks, but that's your job? Whose job is that in your company?

I always thought it was ours at the bottom.
Actually to be fair it's a mixed bag, the middle management almost certainly get the worst deal as they're caught in the middle (and our CEO isn't too bad).

Posted by pererin (# 16956) on :

quote:
Originally posted by EtymologicalEvangelical:
Why can't workers in an organisation be promoted to the highest levels, who would be happy to take a pay rise that amounts to a salary far less than that of the head-hunted executive?

This argument - so loved of the political right - is actually quite vacuous (and I wish it could be comprehensively refuted within our public life).

That's it, blame the right. It was Labour who sent in commissioners when (Independent — aka Tory with a daffodil) elected members at Anglesey County Council decided it wasn't worth ratepayers' money to pay for a chief executive. Local councils could be quite slimline things if it weren't for that socialist penchant for appointing tiers of bureaucrats to deliver a five-year plan dictated from on high.

Quite frankly, I'd much rather have the sort of low-level corruption that was going on in Anglesey (most of which seemed to consist of unproven allegations about planning permission) — if anyone cared, they could always have stood as Mr Clean at the next election (in reality, elections often went uncontested: clearly nobody cared) — than a bunch of soft lefties who believe in central planning being sent by central government to put the council tax up.

And now we see what Rhondda Cynon Taf's version of local government cuts are, now they've realized that the money has run out. Funnily enough, it involves closing schools and libraries, rather than making their countless superfluous overpaid bureaucrats redundant. Pity really there's no way for community councils to hold referenda to join neighbouring counties: they'd lose the bits that used to be in rural districts pre-1974 at a flash, and have to adopt much stricter fiscal responsibility with their cash cows gone.

Posted by Og, King of Bashan (# 9562) on :

quote:
Originally posted by Jay-Emm:

quote:
Originally posted by Og, King of Bashan:
[QB] Re: what CEOs do, I am also sometimes guilty of rolling my eyes at business speak, but consider a few things.

Have you ever started a business and attempted to implement a business plan?
But most CEO's weren't at the startup. Especially at the places with that reputation.

quote:

... and you are the one who has to clean up the mess? It sucks, but that's your job? Whose job is that in your company?
I always thought it was ours at the bottom.
Actually to be fair it's a mixed bag, the middle management almost certainly get the worst deal as they're caught in the middle (and our CEO isn't too bad).

Business plans change, especially as new CEOs come into place. You need to stay fluid. Even if it wasn't the CEO's plan in the first place, it is the job of the CEO to make sure that everyone keeps the model in mind.

As for the person who covers, I've been the top man in some social organizations, and yes, while you might delegate some of the clean up to other people, when someone calls about the idiot's actions and wants to chew somebody out, they want the top person.

Posted by no prophet (# 15560) on :

quote:
Originally posted by Og, King of Bashan:
Re: what CEOs do, I am also sometimes guilty of rolling my eyes at business speak, but consider a few things.

Have you ever started a business and attempted to implement a business plan? It sounds like something they tell you to do that isn't all that important, but if you don't have a plan for how you are going to reach, obtain, and keep customers, you are going to fail. Not everyone is set to do this. I have known a number of people who have tried to start out on their own, and find that their particular gifts are best suited to working in someone else's organization.

Have you ever been at a job when the CEO or boss changed? Did anything chance? Did it all go smoothly, did things start running better, or did this person's personality and skills cause you to start hating your job? A good boss is a great thing, a bad boss will drive you from a secure job.

Have you ever been a leader in an organization? Have you experienced that moment when someone inside the organization does something incredibly stupid without the aid, encouragement, or even knowledge of the organization and you are the one who has to clean up the mess? It sucks, but that's your job? Whose job is that in your company?

So sure, you don't see what the CEO does every day, but you experience it in action. The difference between a good boss and a bad boss to you, the worker, means a whole lot.

Most of the people who say they're in business aren't. They are hired within a company or gov't dept to run it. They don't personally have any capital invested, though they may obtain some options for shares or receive some of their pay through shares.

I own 1 company and am partner in 2 others. Frankly, no-one really understands business until they personally have to meet a payroll. No-one I know who owns a company, i.e., doesn't have anonymous shareholders, pays themselves ridiculous salaries that publicly traded companies do. Most of us make 3-4 times the employed income, with no retirement or pension plan, no disability or life insurance, no plan to pay for uninsured health costs, no job security, and the additional costs to just be in business are a lot more than you think. Psychologically, the impact is huge when you're the one running it. It heavily impacts your family as well. There's no real holidays, you're always on call.

But the hyper salaries that people are discussing here are not justifiable. It is justifiable to have people who truly take risks in business make substantially more than the salaried people who go home at 5 p.m. and don't think further about work. But not the 100 or 1000 times that people hired into corps and banks etc are getting. I do find it rather obscene. I

Posted by Schroedinger's cat (# 64) on :

I think so often what it means is "we need to pay a huge salary to attract people who are very money focused, and so will make us all more focused on making money". This seems to apply in all sorts of areas.

It is pretty despicable IMO. I don't want someone in charge of public services because they are focused on the finances - I want someone who is focused on providing services. I don't want people in charge of my company who are just focused on making more money. I want someone who is focused on managing the business in a responsible way, so that I have a job in 5 years, should I want it. Oh and so that clients have ongoing support and provision.

Posted by Og, King of Bashan (# 9562) on :

quote:
Originally posted by no prophet:
I own 1 company and am partner in 2 others. Frankly, no-one really understands business until they personally have to meet a payroll. No-one I know who owns a company, i.e., doesn't have anonymous shareholders, pays themselves ridiculous salaries that publicly traded companies do. Most of us make 3-4 times the employed income, with no retirement or pension plan, no disability or life insurance, no plan to pay for uninsured health costs, no job security, and the additional costs to just be in business are a lot more than you think. Psychologically, the impact is huge when you're the one running it. It heavily impacts your family as well. There's no real holidays, you're always on call.

Right. So imagine that your company blows up beyond your imagining, and you have many more employees, locations, and clients than you could currently handle in your small business set up. Not only that, you have convinced a bunch of people to invest in your company, and keeping them happy will keep their money in the business. Don't you think it would be worth hiring someone who is really good at managing lots of locations, to take that stress off of you? Add to that the business vision to know that, say, splitting your movie streaming service and your DVD delivery service into two companies for no apparent reason is really going to upset customers and affect your shareholder's bottom line, and I'd say you have a valuable asset.

I don't know what salary is reasonable, but being CEO isn't an easy job.

[ 02. November 2013, 22:56: Message edited by: Og, King of Bashan ]

Posted by no prophet (# 15560) on :

We flirted with that 3 or 4 times. I decided that I wouldn't do it. It came up again this fall. We're not doing it. This is a principled decision based on the idea that connection to the local community and the province, providing good employment, being interested in the welfare of with whom we work, is more important than exploiting and taking what we can.

There are more of us with such views that most people would imagine. I view the process as you outline Og as vaguely psychopathic, and like playing with tar baby, likely to get you dirty in ways familiar to Lady Macbeth. I view deliberate decision making as essential to a decent life, and business decisions, as much as we are informed directly and indirectly that competition and expansion are Holy Way, I think there are substantial, potential anti-people problems with this. (And you can't take it with you. )

Posted by Leorning Cniht (# 17564) on :

quote:
Originally posted by Enoch:
I agree, but there's an extra issue.

These days, these characters are treated more like football managers.

It is amusing to note that in many US colleges, the most highly-paid individual on staff is the football coach. Exactly what that says about US academia is left as an exercise for the reader.

Posted by Timothy the Obscure (# 292) on :

In most US states (I saw a graphic of this not long ago) the highest paid public employee is the state university's football coach.

The baffling thing is when a CEO fucks up and leaves in disgrace with a multi-million severance package (only to get hired by another Fortune 500 company). I want to say, "Hey, I'll be happy to run your company into the ground for a tenth of what you paid that guy to do it..."

Posted by Signaller (# 17495) on :

quote:
Originally posted by Sighthound:
I remember the argument being made in Local Government that in order to get the 'right sort of person' top-level pay needed to be significantly increased. The subtext was that people needed to be brought in from outside the culture, especially from private industry, since the management of UK private industry is known to be oh so superior. (irony).

Anyway, some of these bods were attracted, who knew sweet FA about the job and cared less. I cannot say that I have noticed that the efficiency of Local Government has notably improved compared to what it was in (say) 1975. However, the salary of the top bods has certainly risen a good deal in real terms.

These arguments succeed because there is no-one capable or willing to gainsay them. In what company or institution are there board members capable of saying "No, we don't need the best", or even "Hang on, why does best equal most expensive"?. Either they don't have the courage, or they don't have the incentive because acquiescing will boost their package too. In the short term.

Posted by Hairy Biker (# 12086) on :

quote:
Originally posted by agingjb:
Rich people are motivated by promising to pay them more; poor people are motivated by threatening to pay them less.

(I find this regrettable, but I fear that I'm often in a minority.)

Hang on, did no one else read this? We can't let that go unchallenged.
agingjb, would you care to support your statement with references or argument? I would have thought that the threat of poverty to a rich person would motivate better than the promise of more wealth. And the promise of wealth to a poor person would motivate better than the threat of more poverty. The opposite of what you said.

Posted by agingjb (# 16555) on :

quote:
Originally posted by Hairy Biker:

quote:
Originally posted by agingjb:
Rich people are motivated by promising to pay them more; poor people are motivated by threatening to pay them less.

(I find this regrettable, but I fear that I'm often in a minority.)
Hang on, did no one else read this? We can't let that go unchallenged.
agingjb, would you care to support your statement with references or argument? I would have thought that the threat of poverty to a rich person would motivate better than the promise of more wealth. And the promise of wealth to a poor person would motivate better than the threat of more poverty. The opposite of what you said.

I'm sure that this ought to be the case, I believed that in practice it isn't. But I suppose I'm wrong as usual.

Posted by Arethosemyfeet (# 17047) on :

quote:
Originally posted by Hairy Biker:
Hang on, did no one else read this? We can't let that go unchallenged.
agingjb, would you care to support your statement with references or argument? I would have thought that the threat of poverty to a rich person would motivate better than the promise of more wealth. And the promise of wealth to a poor person would motivate better than the threat of more poverty. The opposite of what you said.

I thought the post was intended as a sarcastic statement of the prevailing view as expressed by both government policy and the press - that the way to make poor people work harder is to reduce their income, but the way to make rich people work harder is to increase it.

Posted by Hairy Biker (# 12086) on :

Ah, sarcasm. Yes, I appear to be losing the plot. Must have spent too long on the americanization thread.

Posted by rufiki (# 11165) on :

[cross post x 2]

If people are sufficiently rich that they don't actually have to work, then you can't motivate them by threatening poverty. If you are using money to motivate them, it'll need to be enough to make an appreciable difference to their fortune and/or ego.

I don't know whether you could motivate the poor better by offering them more than by threatening them with less. But the latter approach may be better overall for the company's bottom line.

Many (most?) people are primarily motivated by factors other than money. But even they, if they see their salary not keeping up with their current lifestyle, will want to do something about it.

[ 03. November 2013, 13:06: Message edited by: rufiki ]

Posted by cliffdweller (# 13338) on :

quote:
Originally posted by rufiki:
[cross post x 2]

If people are sufficiently rich that they don't actually have to work, then you can't motivate them by threatening poverty. If you are using money to motivate them, it'll need to be enough to make an appreciable difference to their fortune and/or ego.

I have a family member who runs in the circles we're talking about, so I've had some superficial social encounters with this group. Based on that admittedly limited experience, I think the 2nd factor-- ego-- is the primary one. Even at the outrageous figures we're looking at, after a certain point it's hard for another million or so to make much of a difference. There's only so many houses/yachts/ etc. one can own. Rather, at this level money seems to be a way of keeping score. Getting top dollar means you are top dog-- you're winning. And it's all about the win.

Posted by Raptor Eye (# 16649) on :

quote:
Originally posted by cliffdweller:
I have a family member who runs in the circles we're talking about, so I've had some superficial social encounters with this group. Based on that admittedly limited experience, I think the 2nd factor-- ego-- is the primary one. Even at the outrageous figures we're looking at, after a certain point it's hard for another million or so to make much of a difference. There's only so many houses/yachts/ etc. one can own. Rather, at this level money seems to be a way of keeping score. Getting top dollar means you are top dog-- you're winning. And it's all about the win.

All is vanity, and a chasing after the wind.....?

I think Ecclesiastes is getting to me.

Posted by Touchstone (# 3560) on :

The local authority I work for recently announced swingeing cuts in its budget and services in the same week as it advertised 5 assistant director posts at £80,000 p.a. (Assistant, note - we already have about 10 fully-fledged parasites on the staff.)

Another triumph for our corporate communications people.

Posted by balaam (# 4543) on :

Touchstone has it right.

When people work on the principle that the top dogs need to be paid as much as possible or they won't work but there are those at the bottom who have to be paid as little as possible or they won't work.

Both statements cannot possibly be true, can they?

Posted by Bullfrog. (# 11014) on :

I read a book lately on statistics and randomness (The Drunkard's Walk) and one case I think the author made well was that in organizations of such massive scale, weal and woe are often driven as much by random chance as by the skill of the CEO.

I also observe that gambling is something that humans find incredibly addictive.

So perhaps paying a CEO hugely is just a huge scale example of gambling on horse races. And just as in horse races or poker, people come up with all kinds of crazy, often superstitious reasons to justify their investment rather than admit that a lot of it boils down to chance.

Posted by Touchstone (# 3560) on :

I'm sure it boils down to chance, bullfrog. IME, these people arrive with a big fanfare, stay just about long enough to learn the names of their immediate subordinates, and then bugger off to their next big job in a year or so, probably trousering a big severance package of taxpayer's money. They don't do anything to add value to the organisation, certainly not as much as they're paid. What is the point of them???

Posted by lilBuddha (# 14333) on :

quote:
Originally posted by Bullfrog.:
I read a book lately on statistics and randomness (The Drunkard's Walk) and one case I think the author made well was that in organizations of such massive scale, weal and woe are often driven as much by random chance as by the skill of the CEO.

This, oh so very much this. for every CEO/head pushing their organisation to new heights, there are 10 plunging theirs into the depths and thousands with no discernible influence. The larger the organisation, the less direct proof of the Head's influence.

Posted by Soror Magna (# 9881) on :

quote:
Originally posted by Doc Tor:
... Recruiting headteachers would be significantly easier if they weren't expected to be in charge of absolutely everything that happens in the school: in charge of the teachers and teaching, yes, but why, for the love of God, do we insist they also be experts on plant, finances, IT and HR? They trained as teachers, not managers, and nine times out of ten it shows.

Pay them less and hire a couple of decent managers to do all the non-teaching stuff.

Totally agree, but this is usually followed by accusations of wasting money on pencil-pushing, paper-shuffling bureaucrats, and squeals of why aren't we spending money on hiring more teachers. There's really no satisfying people that can't make up their minds because they know fuck-all about administration.

Posted by dv (# 15714) on :

Worst of all are the greedy charity executives. One might expect people who choose to lead charities, such as Christian Aid, to see it as some kind of Kingdom work or a vocation but, alas, it seems to be more about "I'm worth the paycheck". My donations now go elsewhere.

[ 03. November 2013, 17:28: Message edited by: dv ]

Posted by no prophet (# 15560) on :

quote:
Originally posted by cliffdweller:

quote:
Originally posted by rufiki:
[cross post x 2]

If people are sufficiently rich that they don't actually have to work, then you can't motivate them by threatening poverty. If you are using money to motivate them, it'll need to be enough to make an appreciable difference to their fortune and/or ego.
I have a family member who runs in the circles we're talking about, so I've had some superficial social encounters with this group. Based on that admittedly limited experience, I think the 2nd factor-- ego-- is the primary one. Even at the outrageous figures we're looking at, after a certain point it's hard for another million or so to make much of a difference. There's only so many houses/yachts/ etc. one can own. Rather, at this level money seems to be a way of keeping score. Getting top dollar means you are top dog-- you're winning. And it's all about the win.

Those who built their position and fortune from nothing or little are more generous than those who were born to it. I cannot find the link to the study just now, but read it a couple of weeks ago.

The only way to curb the very rich salaries is to tax them. Back to the rates of 40 years ago. This would also include corp taxes. And the taxation of yet to be realized capital gains such as through stock options.

Posted by churchgeek (# 5557) on :

quote:
Originally posted by no prophet:
But the hyper salaries that people are discussing here are not justifiable. It is justifiable to have people who truly take risks in business make substantially more than the salaried people who go home at 5 p.m. and don't think further about work. But not the 100 or 1000 times that people hired into corps and banks etc are getting. I do find it rather obscene. I

no prophet, thanks for your insight into what a business owner actually does and has to put up with. You're right - it's these huge, impersonal corporations that really have the ridiculous pay rates for CEOs and the like. Regular small (and larger but still regional) business owners are certainly dedicated to their company and often to their employees. The risk they take and the work they do deserves good compensation, just as the work their employees do deserves good compensation.

One thing that's often forgotten, though, is that - at least in certain industries - workers may leave their jobs at a set time and not really worry about them while they're at home, but their work is inscribed in their bodies. Many people develop tendonitis, arthritis, and other health issues from their work - e.g., bakers sometimes get what's called "white lung," from breathing flour (I had a coworker who developed that when I worked in a grocery store bakery. The store responded by moving her to the bottle return department, where I'm sure the beer fumes were oh so much fun to inhale). And that doesn't take into account the injuries that would be covered under worker's comp. If you have to be on your feet all day, you're going to develop foot problems, maybe varicose veins, etc. And yet the workers whose bodies are impacted so much by their jobs are often among the lowest paid.

A good business owner knows all that, and does whatever they can to mitigate it by not overworking their people, by providing safe and comfortable working conditions, and by providing health insurance, as well as by paying a living wage. At the over-large, impersonal corporations, though, what you often see is that people are kept to part-time in order to save the company the cost of benefits like health insurance, retirement funds, life insurance, paid time off, etc.

I am SO agreed with most people on this thread that the sort of person who requires an enormous salary in order to do their job is precisely the person you don't want running your business. And I think one of the major contributors to this problem is the culture that has moved to emphasizing short-term profits for shareholders. Who cares if the company even goes under after they've sold off their shares? Workers are a dime a dozen, anyway. Almost literally, right?

Posted by no prophet (# 15560) on :

The workers' compensation system here is funded by a tax on payroll. No cost to the worker, but presumably most businesses could pay the 1.25 to 4% depending on industry and claims history, to the worker, but better that there's an insurance plan. It is far better to buy the equipment and make sure working conditions are proper so as to avoid work injury in the first place. The other things business can provide is extended health benefits, other insurance, funding for a retirement funds. Again this all goes back to the ethics of business and whether this should be all about profit or it having interests in the lives of employees and the community is part of it. The personal enrichment and entitlement re these large compensation packages are obviously the opposite direction.

Posted by Leorning Cniht (# 17564) on :

quote:
Originally posted by Soror Magna:

quote:
Originally posted by Doc Tor:

Pay them less and hire a couple of decent managers to do all the non-teaching stuff.
Totally agree, but this is usually followed by accusations of wasting money on pencil-pushing, paper-shuffling bureaucrats, and squeals of why aren't we spending money on hiring more teachers. There's really no satisfying people that can't make up their minds because they know fuck-all about administration.

A good pencil-pushing paper-shuffler is well worth it, but he absolutely has to be subordinate to the leadership of the core mission of the organization, which in the case of the school is teaching.

In too many organizations, this doesn't happen, and the bureaucratic tail is allowed to wag the core dog.

Posted by Marvin the Martian (# 4360) on :

quote:
Originally posted by Timothy the Obscure:
I want to say, "Hey, I'll be happy to run your company into the ground for a tenth of what you paid that guy to do it..."

Sure, and I can miss open goals just as well as Fernando Torres can so maybe Chelsea should pay me a tenth of his salary to do it.

The point is, by hiring one of the best there's always the possibility of failure, but there's also the possibility of success. By hiring one of us there's only the guarantee of failure. And companies don't get the benefit of hindsight at the time they sign the contract.

Posted by LeRoc (# 3216) on :

quote:
Marvin the Martian: The point is, by hiring one of the best there's always the possibility of failure, but there's also the possibility of success. By hiring one of us there's only the guarantee of failure. And companies don't get the benefit of hindsight at the time they sign the contract.

I have worked for many different bosses, but I've never seen anything that suggests a correlation between their level of pay and their competence. If such a correlation exists at all, I even have the suspicion that it might be slightly negative.

Posted by Doc Tor (# 9748) on :

quote:
Originally posted by Marvin the Martian:

quote:
Originally posted by Timothy the Obscure:
I want to say, "Hey, I'll be happy to run your company into the ground for a tenth of what you paid that guy to do it..."
Sure, and I can miss open goals just as well as Fernando Torres can so maybe Chelsea should pay me a tenth of his salary to do it.

The point is, by hiring one of the best there's always the possibility of failure, but there's also the possibility of success. By hiring one of us there's only the guarantee of failure. And companies don't get the benefit of hindsight at the time they sign the contract.

Unlike CEOs, football players' performances are scrutinised by millions every week, and the amount they earn does go up and down. If they consistently underperform, the next time their contract is up for renewal, they take a cut.

Unlike the merrygoround for CEOs, it seems.

Posted by Marvin the Martian (# 4360) on :

Torres may well get a pay cut at his next contract renewal, but he'll still be getting paid more than most of the other players in the Premiership. Of course, I seriously doubt that any CEOs are on fixed-term contracts so contract renewal isn't a thing they have to worry about.

I also doubt that any CEO that has failed horribly (from the shareholders' point of view) in one job will be able to get another job paying a top salary. The salaries may keep rising, but is it the same people in the jobs or are new CEOs taking over from the failed ones?

Posted by chris stiles (# 12641) on :

quote:
Originally posted by Marvin the Martian:

The point is, by hiring one of the best there's always the possibility of failure, but there's also the possibility of success.

The failure rate of companies exhibits a natural distribution (a similar distribution for species dying out), which suggests that bosses are no more able to prevent the demise of their firms than animals can forsee their extinction:

http://arxiv.org/pdf/cond-mat/0212186.pdf

A lot of journalism on the effects of CEOs on firms seem to commit the attribution fallacy.

Posted by Sioni Sais (# 5713) on :

quote:
Originally posted by Leorning Cniht:

quote:
Originally posted by Soror Magna:

quote:
Originally posted by Doc Tor:

Pay them less and hire a couple of decent managers to do all the non-teaching stuff.
Totally agree, but this is usually followed by accusations of wasting money on pencil-pushing, paper-shuffling bureaucrats, and squeals of why aren't we spending money on hiring more teachers. There's really no satisfying people that can't make up their minds because they know fuck-all about administration.
A good pencil-pushing paper-shuffler is well worth it, but he absolutely has to be subordinate to the leadership of the core mission of the organization, which in the case of the school is teaching.

In too many organizations, this doesn't happen, and the bureaucratic tail is allowed to wag the core dog.

The best example of a "paper-shuffler" is the military one, namely a staff officer. Show me a good general and he will point to a staff officer, who may not be of high rank but will be a) intelligent and b) hard-working (by contrast, great generals are often intelligent but lazy!). I wish the same were done in IT, in which highly skilled developers and designers are appointed to management roles for which they are spectacularly unsuited: make them "technical architect" or some such but don't let them manage people or projects.

btw, one of the reasons for paying a fortune for footballers, CEOs and the like isn't to get them to play or work for you, but to ensure they aren't doing a job for the opposition. Who knows what would have happened had Torres gone to Man. Utd?

Posted by Albertus (# 13356) on :

And indeed who cares?

Posted by Jay-Emm (# 11411) on :

Footballers also have regulations strongly favouring really needing the 'best'.
Which makes sense as though I'd imagine a team of 22 Jay-emms might make things hard for Man U (and be a 1/1000th of the price) it wouldn't be football, and it would be odd if you get points for losing but putting up a good show or scoring in the 91st minute (unless you're Man U).
But does make you wonder if there should be more regulation in the opposite direction as well.

Posted by Marvin the Martian (# 4360) on :

quote:
Originally posted by chris stiles:

quote:
Originally posted by Marvin the Martian:

The point is, by hiring one of the best there's always the possibility of failure, but there's also the possibility of success.
The failure rate of companies exhibits a natural distribution (a similar distribution for species dying out), which suggests that bosses are no more able to prevent the demise of their firms than animals can forsee their extinction:

http://arxiv.org/pdf/cond-mat/0212186.pdf

A lot of journalism on the effects of CEOs on firms seem to commit the attribution fallacy.

That's not a rebuttal of what I said. If it's known that a given number of firms are going to fail in any given period, then the competition between them for the best CEOs is going to be even more fierce, because none of them wants to be one of the failures.

To go back to the football analogy, 15% of Premiership teams get relegated every single season. Does that mean that football managers are unable to do anything about whether their team is relegated or not?

Posted by chris stiles (# 12641) on :

quote:
Originally posted by Marvin the Martian:
That's not a rebuttal of what I said. If it's known that a given number of firms are going to fail in any given period, then the competition between them for the best CEOs is going to be even more fierce, because none of them wants to be one of the failures.

Of course it is - otherwise the statistics wouldn't exhibit that sort of distribution - there is no law that states 15% of firms will fail (hence why the comparison with the premiership doesn't bear out).

quote:

To go back to the football analogy, 15% of Premiership teams get relegated every single season. Does that mean that football managers are unable to do anything about whether their team is relegated or not?

Possibly, yes:

http://econpapers.repec.org/paper/pramprapa/11030.htm

At the very least this suggests that there is going to be a measurement problem in working out what factor of success is likely to be attributed to the chap at the top.

In the worst case we are just paying for a lucky monkey in a suit. Consider that fund management is many times less complex than managing a multinational - it would be surprising if the situation for CEOs was any better than that of fund managers (that generally as a group they perform no better than you would expect given chance and survivor bias).

Posted by Marvin the Martian (# 4360) on :

quote:
Originally posted by chris stiles:

quote:
Originally posted by Marvin the Martian:
That's not a rebuttal of what I said. If it's known that a given number of firms are going to fail in any given period, then the competition between them for the best CEOs is going to be even more fierce, because none of them wants to be one of the failures.
Of course it is - otherwise the statistics wouldn't exhibit that sort of distribution - there is no law that states 15% of firms will fail (hence why the comparison with the premiership doesn't bear out).

In a finite market, any growth by one company means one or more other companies will shrink. Since very few of the companies are likely to agree to a state of stasis where none of them ever grow, it's inevitable that some will fail. The only thing the companies can do is try to make sure they're not the ones going bust, and that's where hiring the best leaders comes in.

Posted by Enoch (# 14322) on :

This is a bit like politicians saying every school must be in the upper percentile. It demonstrates that whatever school they went to failed in its task of inculcating very basic maths.

Posted by Marvin the Martian (# 4360) on :

How does that follow from what I said?

Posted by chris stiles (# 12641) on :

quote:
Originally posted by Marvin the Martian:
In a finite market, any growth by one company means one or more other companies will shrink. Since very few of the companies are likely to agree to a state of stasis where none of them ever grow, it's inevitable that some will fail. The only thing the companies can do is try to make sure they're not the ones going bust, and that's where hiring the best leaders comes in.

Actually, on that basis all you need to do is hire someone slightly better than everyone else.

However - if - as the footballing example above shows - it's hard to tell who would improve the performance of a 'firm' of a few dozen people, what hope do you have of predicting who would be a good boss of a multinational? [Furthermore; if you are on the right, at some point Hayek's critique of central planning starts to apply].

Especially as:

http://repec.org/sce2004/up.28483.1076498136.pdf

"the clear implication is that firms have very limited capacities to acquire knowledge about the true impact of their strategies."

That boards have a track record of interspersing failed appointments with apparently successful ones tends to underline this.

Posted by Justinian (# 5357) on :

quote:
Originally posted by Marvin the Martian:
I also doubt that any CEO that has failed horribly (from the shareholders' point of view) in one job will be able to get another job paying a top salary. The salaries may keep rising, but is it the same people in the jobs or are new CEOs taking over from the failed ones?

I'd also have thought that after literally almost crashing the global financial system at Long Term Capital Management there would be no way John Meriweather would get a second chance or even raise almost $30 million for a third. But ther you are.

Or after running Compaq into the ground Echard Pfeiffer would be on the boards of several companies.

In fact 38% of the highest paid CEOs in America in the last two decades have ended up either in jail, thrown out, or bailed out by the taxpayer. Great rate of return there.

Posted by Marvin the Martian (# 4360) on :

quote:
Originally posted by chris stiles:

quote:
Originally posted by Marvin the Martian:
In a finite market, any growth by one company means one or more other companies will shrink. Since very few of the companies are likely to agree to a state of stasis where none of them ever grow, it's inevitable that some will fail. The only thing the companies can do is try to make sure they're not the ones going bust, and that's where hiring the best leaders comes in.
Actually, on that basis all you need to do is hire someone slightly better than everyone else.

Yes, that's what I said. "Slightly better than everyone else" is still "the best".

quote:
However - if - as the footballing example above shows - it's hard to tell who would improve the performance of a 'firm' of a few dozen people, what hope do you have of predicting who would be a good boss of a multinational?

The same way you predict who will be good in any job, I imagine - look at their past record and hold an interview.

Posted by lilBuddha (# 14333) on :

It was several of "the best" who sent the world economy on an express lift to the cellar.
So, point to you in saying CEOs can make a difference.

Posted by Marvin the Martian (# 4360) on :

quote:
Originally posted by Justinian:
I'd also have thought that after literally almost crashing the global financial system at Long Term Capital Management there would be no way John Meriweather would get a second chance or even raise almost $30 million for a third. But ther you are.

It doesn't really count if he started his own company after failing at the first one.

quote:
Or after running Compaq into the ground Echard Pfeiffer would be on the boards of several companies.

On the Board isn't CEO, is it? And from that link it looks like he had a lot of successes to go with the eventual downturn.

quote:
In fact 38% of the highest paid CEOs in America in the last two decades have ended up either in jail, thrown out, or bailed out by the taxpayer. Great rate of return there.

Given that "thrown out" includes "left their post because the company lost market share and/or profits fell", and given the fact that the period under consideration includes the biggest recession since WW2, I'd say it's not bad at all. You have to remember that a good CEO cannot guarantee success, but a bad CEO can guarantee failure.

[ 07. November 2013, 15:46: Message edited by: Marvin the Martian ]

Posted by Marvin the Martian (# 4360) on :

quote:
Originally posted by lilBuddha:
It was several of "the best" who sent the world economy on an express lift to the cellar.
So, point to you in saying CEOs can make a difference.

Are you suggesting that having worse CEOs in those jobs would have somehow saved the economy from crashing?

Posted by lilBuddha (# 14333) on :

quote:
Originally posted by Marvin the Martian:
You have to remember that a good CEO cannot guarantee success, but a bad CEO can guarantee failure.

Dude! I am starting a PR firm and you are my first hire.
That is as beautiful a line of bullshit as I have ever read. Truly masterful spin.

Posted by lilBuddha (# 14333) on :

quote:
Originally posted by Marvin the Martian:

quote:
Originally posted by lilBuddha:
It was several of "the best" who sent the world economy on an express lift to the cellar.
So, point to you in saying CEOs can make a difference.
Are you suggesting that having worse CEOs in those jobs would have somehow saved the economy from crashing?

I am suggesting that those were the worst. Or, perhaps, simply just a little bit worse.
These were people hired because they were supposed to be good. Because others had viewed their track record, interviewed them and hired them.
Few, if any, did not see consequences in their actions. It was greed which pushed things over the edge and the general lack of accountability which emboldened them.

Posted by chris stiles (# 12641) on :

quote:
Originally posted by Marvin the Martian:

quote:
However - if - as the footballing example above shows - it's hard to tell who would improve the performance of a 'firm' of a few dozen people, what hope do you have of predicting who would be a good boss of a multinational?
The same way you predict who will be good in any job, I imagine - look at their past record and hold an interview.

The evidence in those papers point strongly to an alternate conclusion - namely that most of the 'past record' is attributable to luck [in the same way that studies on the performance gains attained by fund managers - operating with significantly fewer variables - also indicates].

Posted by LeRoc (# 3216) on :

quote:
Originally posted by Marvin the Martian:

quote:
Originally posted by lilBuddha:
It was several of "the best" who sent the world economy on an express lift to the cellar.
So, point to you in saying CEOs can make a difference.
Are you suggesting that having worse CEOs in those jobs would have somehow saved the economy from crashing?

It suggests that the best-paid CEOs often aren't the best.

Posted by Marvin the Martian (# 4360) on :

Are you people really suggesting that who leads a company is irrelevant? That you or I could start as CEO of any Fortune 500 company tomorrow and do just as good a job as whoever is in that role today? Chris certainly seems to be trying to suggest that.

It's obvious to me that a company will always want to attract the best possible person to be its CEO. And to do that, it will have to offer a salary/benefits package that's appealing enough to tempt that person away from whatever job they're currently in. And every new CEO salary/benefits package affects what will be considered attractive in the next one. There aren't many people in the world who are capable of doing a very good job at that level, making it a seller's market (whereas at the level where I operate there are tens of thousands of people who could do a very good job, making it a buyer's market). And note, again, that I said "capable of..." not "guaranteed to...".

Posted by Marvin the Martian (# 4360) on :

quote:
Originally posted by LeRoc:

quote:
Originally posted by Marvin the Martian:

quote:
Originally posted by lilBuddha:
It was several of "the best" who sent the world economy on an express lift to the cellar.
So, point to you in saying CEOs can make a difference.
Are you suggesting that having worse CEOs in those jobs would have somehow saved the economy from crashing?
It suggests that the best-paid CEOs often aren't the best.

Or maybe it suggests that even the best get it wrong occasionally.

Posted by LeRoc (# 3216) on :

quote:
Marvin the Martian: Or maybe it suggests that even the best get it wrong occasionally.

On what basis do you call them 'the best'? Just on the fact that they charge high amounts?

quote:
Marvin the Martian: Are you people really suggesting that who leads a company is irrelevant?

No, I'm not. But you are confusing 'well-paid' with 'good'. What you seem to be trying to say is:

If you contract a 'cheap' CEO, you can be sure that he won't do a good job.
If you contract an 'expensive' CEO, then at least you'll have a chance that he might do a good job.
Therefore, it makes sense to contract an expensive CEO.

You don't have evidence for your statement 1, and even then, it isn't a very strong case to spend on an expensive CEO just on the chance that he might be good. It depends a lot on how big this chance is, and I've seen enough examples that suggest that it isn't very big.

I have the feeling that there is something of a personality cult going on. Savvy CEO's charge high amounts. Companies then think "if he charges this much, he must be good" and disregard his past results.

My solution would be to have a lower budget for CEO's and a selection process that is more focused on actual qualities.

[ 07. November 2013, 16:20: Message edited by: LeRoc ]

Posted by Doc Tor (# 9748) on :

quote:
Originally posted by Marvin the Martian:
Are you people really suggesting that who leads a company is irrelevant? That you or I could start as CEO of any Fortune 500 company tomorrow and do just as good a job as whoever is in that role today? Chris certainly seems to be trying to suggest that.

I would suggest that any decent actor could take that job, since the chief role of a CEO seems to be convincing the shareholders they're the CEO of a massive corporation and they're totally worth the money.

Actual competence is, apparently, optional. And actors would make far better liars, which is also part of the job.

Posted by lilBuddha (# 14333) on :

quote:
Originally posted by Marvin the Martian:
Are you people really suggesting that who leads a company is irrelevant? That you or I could start as CEO of any Fortune 500 company tomorrow and do just as good a job as whoever is in that role today? Chris certainly seems to be trying to suggest that.

Unless a CEO implements major changes, it is difficult to track their effectiveness. The larger the company, the more this is true. There are, generally, many variables in a companies success. Only some of which are internal.
Another problem of tracking large businesses is their inertia. If bad decisions always sank a business, IBM would no longer be a going concern.

Posted by quetzalcoatl (# 16740) on :

This kind of thing seems to happen in my profession (therapy and counselling), as it's well known, that if you weary of low-paid work, the trick is to market your skills to various companies, under some kind of oleaginous heading, as 'Skill set training for managers', or whatever, and whatever you do, charge them an arm and a leg. If you don't, they will probably think you're crap. Thus, maybe you could start at 3 grand a day for small groups, and go up to 5 grand a day for larger ones. Look at me, I did that, and I dine on caviar and Kobe beef every night. I made that bit up.

Posted by chris stiles (# 12641) on :

quote:
Originally posted by Marvin the Martian:
Are you people really suggesting that who leads a company is irrelevant? That you or I could start as CEO of any Fortune 500 company tomorrow and do just as good a job as whoever is in that role today? Chris certainly seems to be trying to suggest that.

No. The pool of possible CEOs is far wider than the pool of actual CEOs. Generally all you want is someone personable, with some charisma who is a decent operational manager who isn't going to embarrass himself. You are trying to give people confidence by hiring someone who is a known quantity in that market (this incidentally would explain why, bleatings to the contrary, very few British CEOs go on to run American companies).

What you actually get is a situation where more than 50% of companies attempt simultaneously to pay within the top decile of possible salaries. Which is why the salaries of executives are not really elastic with respect to performance. In good times, pay goes up, in bad times pay either still goes up, or doesn't fall as fast.

Again, compare this with the situation of fund managers. They work with far fewer variables, and their performance is measured very exactly on a yearly basis. There have been numerous studies done that show that past performance does not imply future performance, which again suggests that fund performance is largely attributable to luck and survivor bias rather than some X factor on the part of the fund managers.

A run of bad luck that would take out a small company is survivable by a large company with a large asset base. Similarly a period of growth after decline can simply be a reversion to mean (which is what that football example shows btw).

It may well be that part of a firms performance is down to performance of the man at the top; what all studies show though is that we are currently unable to measure this factor and frequently confuse it with other things entirely.

Posted by chris stiles (# 12641) on :

quote:
Originally posted by quetzalcoatl:
If you don't, they will probably think you're crap. Thus, maybe you could start at 3 grand a day for small groups, and go up to 5 grand a day for larger ones.

Incidentally, the consulting industry has refined this to a fine art. A graduate one day out of uni from one of the top firms, in a suit, on customer premises will cost in excess of 1500+ a day.

Posted by LeRoc (# 3216) on :

The same happens in my line of work with regards to 'consultants'. Organizations pay them big bucks to 'facilitate processes' where they do nothing but talk absolute crap. But they must be good, because they cost € 40,000. The only understandable conclusion they draw for the organisation at the end of this process is that you need to hire them again for a 'follow-up process'.

All of the organization engages in some kind of double-talk, repeating the lingo he used without understanding a word of it, in order to be perceived as 'down with it'. And if you're the only one in the organisation who points out that it's all utter bullshit, you're just not 'down with the flow'.

[ 07. November 2013, 16:56: Message edited by: LeRoc ]

Posted by Enoch (# 14322) on :

quote:
Originally posted by Marvin the Martian:
How does that follow from what I said?

Sorry, Marvin, I wasn't replying to your specific comment, but to the way the thread seemed to be going over a series of posts.

Posted by Amanda B. Reckondwythe (# 5521) on :

quote:
Originally posted by LeRoc:
The same happens in my line of work with regards to 'consultants'. Organizations pay them big bucks. . . .

Consultant: A person paid money to say what staff would say if you cared enough to listen.

What does a CEO decide anyway that is different from what staff would collectively decide if allowed to do so?

Posted by lilBuddha (# 14333) on :

Consulting.

Posted by Marvin the Martian (# 4360) on :

quote:
Originally posted by LeRoc:
What you seem to be trying to say is:
If you contract a 'cheap' CEO, you can be sure that he won't do a good job.
If you contract an 'expensive' CEO, then at least you'll have a chance that he might do a good job.
Therefore, it makes sense to contract an expensive CEO.

The same principle applies most of the way down the job ladder. If you hire a cheap plumber they almost certainly won't be as good as one that charges the market rate.

Posted by Garasu (# 17152) on :

But it doesn't seem to be a free market in CEOs...

Posted by LeRoc (# 3216) on :

quote:
Marvin the Martian: The same principle applies most of the way down the job ladder. If you hire a cheap plumber they almost certainly won't be as good as one that charges the market rate.

The difference is that if a plumber does a bad job, you'll notice right away. People won't think "The tube is still leaking but he's expensive so he must be good." There is a natural mechanism that weeds out bad plumbers who charge a lot.

There doesn't seem to be such a mechanism with CEO's and consultants. They get away with crap for a long time.

Posted by Doc Tor (# 9748) on :

quote:
Originally posted by Marvin the Martian:
The same principle applies most of the way down the job ladder. If you hire a cheap plumber they almost certainly won't be as good as one that charges the market rate.

Not at all. The plumber may just be starting out, and has lowered their rates to attract business. They may genuinely look on their work as a service to the community, and not so interested in profit. They might have low overheads, therefore can charge less.

You hire a plumber by personal recommendation if at all possible: their prices are mostly a secondary consideration.

Posted by Sioni Sais (# 5713) on :

quote:
Originally posted by Doc Tor:

quote:
Originally posted by Marvin the Martian:
The same principle applies most of the way down the job ladder. If you hire a cheap plumber they almost certainly won't be as good as one that charges the market rate.
Not at all. The plumber may just be starting out, and has lowered their rates to attract business. They may genuinely look on their work as a service to the community, and not so interested in profit. They might have low overheads, therefore can charge less.

You hire a plumber by personal recommendation if at all possible: their prices are mostly a secondary consideration.

That may be the case, but just as you're buying reputation and credibility with an expensive CEO, you're doing the same with plumbers and electricians.

[ 08. November 2013, 08:13: Message edited by: Sioni Sais ]

Posted by Marvin the Martian (# 4360) on :

quote:
Originally posted by Garasu:
But it doesn't seem to be a free market in CEOs...

In what way?

quote:
Originally posted by LeRoc:
The difference is that if a plumber does a bad job, you'll notice right away. People won't think "The tube is still leaking but he's expensive so he must be good." There is a natural mechanism that weeds out bad plumbers who charge a lot.

There doesn't seem to be such a mechanism with CEO's and consultants. They get away with crap for a long time.

I guess it depends on what "a good job" is for a CEO. There's a whole bunch of subjective stuff in there, like Providing Effective Leadership, Managing Corporate Strategy and Horizon Scanning. I guess increasing profits and market share would be measurable, but then how many of the so-called "bad CEOs" were doing exactly that right up to the moment it all went tits up?

Of course, if any of the rest of us are doing a great job but then something goes horribly wrong we tend to get a second chance. Most CEOs don't - one mistake or failure to predict what will happen in the next quarter and they're out on their asses with a bunch of lefties crowing about how terrible they are and calling for them to lose their contractual earnings and never work again.

I can't imagine how I'd feel if I made one or two bad mistakes at work, got sacked for them and then had a bunch of people calling for me to lose my pension, but as I doubt I'd be happy with the situation I can't exactly condone people doing it to anyone else.

Posted by Doc Tor (# 9748) on :

quote:
Originally posted by Sioni Sais:

quote:
Originally posted by Doc Tor:

quote:
Originally posted by Marvin the Martian:
The same principle applies most of the way down the job ladder. If you hire a cheap plumber they almost certainly won't be as good as one that charges the market rate.
Not at all. The plumber may just be starting out, and has lowered their rates to attract business. They may genuinely look on their work as a service to the community, and not so interested in profit. They might have low overheads, therefore can charge less.

You hire a plumber by personal recommendation if at all possible: their prices are mostly a secondary consideration.
That may be the case, but just as you're buying reputation and credibility with an expensive CEO, you're doing the same with plumbers and electricians.

I'd argue that you're buying a known reputation and credibility with plumbers and electricians, unlike CEOs, where you're buying an illusion of reputation and credibility.

Posted by chris stiles (# 12641) on :

quote:
Originally posted by Marvin the Martian:
I guess increasing profits and market share would be measurable, but then how many of the so-called "bad CEOs" were doing exactly that right up to the moment it all went tits up?

Again, this underlines the strength of the alternate explanation - in that a lot of so called success could well be down to pure luck and a reversion to mean (see again the links above). Your explanation could equally be the product of an attribution fallacy

quote:

their asses with a bunch of lefties crowing about how terrible they are and calling for them to lose their contractual earnings and never work again.

Pension obligations are also a form of contractual earnings.

[ 08. November 2013, 08:44: Message edited by: chris stiles ]

Posted by Karl: Liberal Backslider (# 76) on :

The only case I can think of with hoards of screaming lefties demanding loss of pension etc was Fred Goodwin; bit of an outlier that one, really. I don't think that his cockups can be described as "one or two bad mistakes" in the same way as Chatsworth can't be described as "a little detached place in the country with a bit of land", and the vast majority of CEOs who cock up in the normal run of the mill way do not face such demands from "lefties".

Posted by Frankenstein (# 16198) on :

I have read recently of a software designer who was so well paid that he could afford to outsource his work to a company in China!
Need I say more?

Posted by Frankenstein (# 16198) on :

Perhaps the comparatively poor pay the Prime Minister gets accounts for the rubbish applicants we get for the job?

Posted by quetzalcoatl (# 16740) on :

quote:
Originally posted by Frankenstein:
I have read recently of a software designer who was so well paid that he could afford to outsource his work to a company in China!
Need I say more?

The last book I wrote was proof-read by a woman in Singapore, while the publishers are in London, like me. And I had to post the Mss to her by mail, not email, so who knows how little they are paying her. Still, she earned more than me.

Posted by Dave W. (# 8765) on :

quote:
Originally posted by Marvin the Martian:
Of course, if any of the rest of us are doing a great job but then something goes horribly wrong we tend to get a second chance. Most CEOs don't - one mistake or failure to predict what will happen in the next quarter and they're out on their asses with a bunch of lefties crowing about how terrible they are and calling for them to lose their contractual earnings and never work again.

Most CEO's lose their jobs after a single quarter of bad results? What makes you think that's true?

Posted by Justinian (# 5357) on :

quote:
Originally posted by Marvin the Martian:

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Originally posted by Justinian:
I'd also have thought that after literally almost crashing the global financial system at Long Term Capital Management there would be no way John Meriweather would get a second chance or even raise almost $30 million for a third. But ther you are.
It doesn't really count if he started his own company after failing at the first one.

Bullshit. Your point is about how people wouldn't trust a proven failure. There are few more proven failures than Merriweather. Yet people trusted him even afterwards to the tune of hundreds of millions of dollars. Making your case ... incredibly questionable as well as your counter-argument being a True Scotsman fallacy.

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Or after running Compaq into the ground Echard Pfeiffer would be on the boards of several companies.
On the Board isn't CEO, is it?

No. It's just paid tens or even hundreds of thousands of dollars to do ... not very much.

It's amazing to see just how much people will bend over backwards to justify the ridiculous rates paid to the top 1%

Posted by Marvin the Martian (# 4360) on :

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Originally posted by Justinian:
Bullshit. Your point is about how people wouldn't trust a proven failure.

No it wasn't - it was about whether a company would hire a proven failure as their new CEO.

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On the Board isn't CEO, is it?
No. It's just paid tens or even hundreds of thousands of dollars to do ... not very much.

Have you ever actually worked alongside a Board member for any length of time? They do actually work, you know.

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It's amazing to see just how much people will bend over backwards to justify the ridiculous rates paid to the top 1%

That's the thing, though - are they actually ridiculous, or is it a case of having to pay the market rate for people with a rare skillset?

I'm sure there are people who think being paid over £30,000 (plus pension contributions and expenses) to push numbers around a spreadsheet all day is ridiculous, but I (and more importantly, my employer) happen to think it's what my skills are worth.

Posted by LeRoc (# 3216) on :

Suppose for a moment that I was in charge of selecting a CEO for a big company.

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Marvin the Martian: I guess it depends on what "a good job" is for a CEO. There's a whole bunch of subjective stuff in there, like Providing Effective Leadership, Managing Corporate Strategy and Horizon Scanning. I guess increasing profits and market share would be measurable, but then how many of the so-called "bad CEOs" were doing exactly that right up to the moment it all went tits up?

I would fire him, or at least not hire him again. If things went tits up, then the CEO is responsible for that. It is his job to see to it that things won't go tits up.

He may have provided Effective Leadership, Managing Corporate Strategy and Horizon Scanning, but I would only be interested in that if they provided a bigger advantage to my company than what they cost me. If things went tits up, these haven't provided anything to me at all, and I wouldn't take them into account.

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Marvin the Martian: Of course, if any of the rest of us are doing a great job but then something goes horribly wrong we tend to get a second chance.

What the examples on this thread show is that CEO's get second chances that your ordinary plumber won't get. If the plumber messes up in such a way repeatedly that it costs his contractors big money, he will lose his clientele rather quickly. If you repeatedly do something stupid in your work that costs the company a lot of money, I'll bet that you'll have a looong conversation with your boss. And your next promotion might be postponed for a while.

Yet CEO's who repeatedly do things like this are hired and hired again for even bigger salaries. The same standards don't apply to them. How many second, third, fourth... chances are you prepared to give them before you start thinking "Maybe I shouldn't be paying them this much"?

quote:
Marvin the Martian: Most CEOs don't - one mistake or failure to predict what will happen in the next quarter and they're out on their asses with a bunch of lefties crowing about how terrible they are and calling for them to lose their contractual earnings and never work again.

What do lefties have to do with it? The only thing I'm saying is that if I was in charge of selecting a CEO, I would first leave the Big Names aside, and look into the pool of cheaper people and really test them to see if they can do a good job. That's straight-forward, decent capitalism, isn't it?

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Marvin the Martian: I can't imagine how I'd feel if I made one or two bad mistakes at work, got sacked for them and then had a bunch of people calling for me to lose my pension

Who is calling for anyone to lose his pension? I'm sure that the big-name CEO's have provided handily for that.

Posted by Marvin the Martian (# 4360) on :

quote:
Originally posted by LeRoc:
Suppose for a moment that I was in charge of selecting a CEO for a big company.

quote:
Marvin the Martian: I guess it depends on what "a good job" is for a CEO. There's a whole bunch of subjective stuff in there, like Providing Effective Leadership, Managing Corporate Strategy and Horizon Scanning. I guess increasing profits and market share would be measurable, but then how many of the so-called "bad CEOs" were doing exactly that right up to the moment it all went tits up?
I would fire him, or at least not hire him again.

Yes, that's what I was saying. Or to be precise, I was saying that all those "obviously terrible CEOs" were doing a perfectly good job until things went wrong, and therefore weren't exactly "obviously terrible".

quote:
If things went tits up, then the CEO is responsible for that. It is his job to see to it that things won't go tits up.

Yes, that's true. That's a lot of responsibility for one person, wouldn't you say? Especially in a multinational corporation operating in a multitude of countries, each with different legal jurisdictions and economic situations, all of which you'd be expected to know intimately in order to do the job even slightly well. And it's not like CEO is the sort of job where you get in-service training, you're expected to be able to step straight in and do it from day one.

What would you say is a fair salary for that level of responsibility and expectation?

quote:
Yet CEO's who repeatedly do things like this are hired and hired again for even bigger salaries.

Are they, though? Sure, there are always CEOs, and the salaries keep going up, but are they always the same people?

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The same standards don't apply to them. How many second, third, fourth... chances are you prepared to give them before you start thinking "Maybe I shouldn't be paying them this much"?

How many burst pipes does it take before you start saying that all plumbers are crap and should be paid considerably less?

quote:
The only thing I'm saying is that if I was in charge of selecting a CEO, I would first leave the Big Names aside, and look into the pool of cheaper people and really test them to see if they can do a good job. That's straight-forward, decent capitalism, isn't it?

In a way, yes. Just like saying if you were looking for a plumber you might choose a complete novice and give them a chance to see if they can do a good job on your pipes is straight-forward, decent capitalism. Of course, if your pipes are at all important to you you might prefer to go for someone with proven experience in the job...

Posted by LeRoc (# 3216) on :

quote:
Marvin the Martian: I was saying that all those "obviously terrible CEOs" were doing a perfectly good job until things went wrong, and therefore weren't exactly "obviously terrible".

If it is someone's job to make sure that things don't go wrong, then if things do go wrong they have done a terrible job. It doesn't matter if they have done perfectly good things before that.

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Marvin the Martian: What would you say is a fair salary for that level of responsibility and expectation?

I don't know. But what I do know that I wouldn't pay an exorbitantly high salary to someone who has screwed up in the past.

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Marvin the Martian: Sure, there are always CEOs, and the salaries keep going up, but are they always the same people?

As Justinian's links showed earlier on this thread, to a large degree they are.

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Marvin the Martian: How many burst pipes does it take before you start saying that all plumbers are crap and should be paid considerably less?

I haven't said that all CEO's are crap.

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Marvin the Martian: Of course, if your pipes are at all important to you you might prefer to go for someone with proven experience in the job...

I wouldn't pay big bucks for a plumber whose 'proven experience' consists of a string of failures. Yet, with a large number of CEO's this seems to happen. I guess I'd prefer a plumber who has slightly less experience, but all of his experiences were successes.

Posted by Marvin the Martian (# 4360) on :

quote:
Originally posted by LeRoc:

quote:
Marvin the Martian: I was saying that all those "obviously terrible CEOs" were doing a perfectly good job until things went wrong, and therefore weren't exactly "obviously terrible".
If it is someone's job to make sure that things don't go wrong, then if things do go wrong they have done a terrible job. It doesn't matter if they have done perfectly good things before that.

Point is, you can't complain about high salaries being paid for failure when those salaries were agreed at a time when the person was actually a success.

quote:

quote:
Marvin the Martian: What would you say is a fair salary for that level of responsibility and expectation?
I don't know. But what I do know that I wouldn't pay an exorbitantly high salary to someone who has screwed up in the past.

Would you apply that to all levels of work, out of interest? Or is it only at the top where one failure equals career over?

quote:

quote:
Marvin the Martian: Sure, there are always CEOs, and the salaries keep going up, but are they always the same people?
As Justinian's links showed earlier on this thread, to a large degree they are.

Justinian's links earlier showed one person who came back from failure by starting his own company (which even you must agree gives him the right to pay himself whatever he thinks is fair), and one person who hasn't yet got another CEO job.

quote:

quote:
Marvin the Martian: How many burst pipes does it take before you start saying that all plumbers are crap and should be paid considerably less?
I haven't said that all CEO's are crap.

Just that they shouldn't be paid as much.

quote:

quote:
Marvin the Martian: Of course, if your pipes are at all important to you you might prefer to go for someone with proven experience in the job...
I wouldn't pay big bucks for a plumber whose 'proven experience' consists of a string of failures. Yet, with a large number of CEO's this seems to happen. I guess I'd prefer a plumber who has slightly less experience, but all of his experiences were successes.

With the exception of someone who created a new company and declared themself CEO, there hasn't been a single example yet of a company hiring a previously-failed CEO as their new CEO, much less anyone with a "string of failures" continuing to find themselves recruited to CEO jobs.

Posted by cliffdweller (# 13338) on :

quote:
Originally posted by LeRoc:
What the examples on this thread show is that CEO's get second chances that your ordinary plumber won't get. If the plumber messes up in such a way repeatedly that it costs his contractors big money, he will lose his clientele rather quickly. If you repeatedly do something stupid in your work that costs the company a lot of money, I'll bet that you'll have a looong conversation with your boss. And your next promotion might be postponed for a while.

Yet CEO's who repeatedly do things like this are hired and hired again for even bigger salaries. The same standards don't apply to them. How many second, third, fourth... chances are you prepared to give them before you start thinking "Maybe I shouldn't be paying them this much"?

Yes. In my limited experience of a family member who's one of the sharks swimming in this pond, it appears to me that the title, once obtained, becomes a credential in and of itself. Once you are "CEO of a Fortune 500 Company", even if you are "former CEO of a Fortune 500 Company" or "former CEO of a formerly Fortune 500 Company" that becomes your entire resume. You can parlay that title into top-dollar speaking gigs, cushy corporate board of directors seats, and yes, other CEO gigs. Because that IS your experience-- being CEO. That's your resume.

You are considered an expert (and not just on business-- my relative has tried to play this card on everything from what to serve for Xmas dinner to how to care for aged parents-- because since "everything of value can be bought and sold" being an "expert" at business means you're an expert at everything). And of course, you can usually cherry-pick one statistic out of your entire career: "under Mr CEO's leadership the company recorded the largest jump in profits in any quarter of the company's history" ... w/o mentioning the context (following a devastating drop that nearly bankrupt the company so there was no where to go but up, the next quarter was similarly disastrous as it turns out the gains were creative accounting...).

Posted by LeRoc (# 3216) on :

quote:
Marvin the Martian: Point is, you can't complain about high salaries being paid for failure when those salaries were agreed at a time when the person was actually a success.

True, but if a person was already a failure in another company, I wouldn't hire him for a high salary in my company.

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Marvin the Martian: Would you apply that to all levels of work, out of interest? Or is it only at the top where one failure equals career over?

Do people deserve a second chance? Yes, sometimes they do. Even CEO's.

I'd really need to be convinced though that they would be showing some kind of change compared to what they did that lead to the failure. If I had a company, would I hire a CEO who has screwed up in another company, in order to give him a second chance? I think I'd prefer someone who hasn't.

And yes, some CEO's who screwed up time after time really should take on another career. What's wrong with that?

Let's get the plumbing analogy straight here. You have a leak in your house, and you have a choice between hiring Plumber Jack and Plumber Joe.

A lot of people consider Plumber Jack to be top-notch. He's been doing this for years, and people speak very highly of him. He charges very high, so he must be good. He can cite all the important plumbing techniques without a blink. Yet, during the last week he had a major mess-up. He repaired the piping in someone's house, but a couple of days afterwards there was a major leak, causing considerable damage to the bathroom. And as a matter of fact, the same thing happened in another house last month.

Plumber Joe isn't that well-known. His rates are lower, and a lot of people would put up their noses considering hiring him. Yet, the jobs he has done have been good.

Which one would you hire? And be really honest, would 'giving someone a second chance' enter in your considerations?

quote:
Marvin the Martian: Justinian's links earlier showed one person who came back from failure by starting his own company (which even you must agree gives him the right to pay himself whatever he thinks is fair), and one person who hasn't yet got another CEO job.

Last link in this post.

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Marvin the Martian: Just that they shouldn't be paid as much.

I'm saying that it's dumb to pay a lot to a CEO who has proven to be crap.

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Marvin the Martian: With the exception of someone who created a new company and declared themself CEO, there hasn't been a single example yet of a company hiring a previously-failed CEO as their new CEO, much less anyone with a "string of failures" continuing to find themselves recruited to CEO jobs.

See the link I gave above.

[ 08. November 2013, 15:21: Message edited by: LeRoc ]

Posted by cliffdweller (# 13338) on :

Exactly. "Giving someone a 2nd chance" usually doesn't mean stepping right back into where you were before w/o losing a step. Generally, it means taking your lumps-- being willing to go back a step or two, to be supervised a bit more closely-- at least for a period of time while you earn back trust and rebuild your reputation.

Plumber Jack who has screwed up his last two jobs might find he can't get the big, high-reward corporate construction jobs for awhile. He might have to go back to doing lowly house calls for awhile while he's rebuilding his rep-- and taking a cut in pay to go with that. That's what a 2nd chance looks like.

The same ought to be true of CEO's. The expectation ought to be that after screwing up big time, you're going to go back to middle management, relearn the business from the ground up, and work your way back. The not-uncommon practice of driving a company into the ground then stepping into a very comparable position in a different company strikes me as insane.

[ 08. November 2013, 15:30: Message edited by: cliffdweller ]

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