Comment H9F4 Re: Basic Economics


CEO pay getting more ire from shareholders


Basic Economics (Score: 2, Insightful)

by on 2015-08-12 20:44 (#H74Z)

When the law changed to require executive compensation to be reported along with the other financials for publicly traded companies, we handed future CEO's an incredible amount of power. If you or I apply for a job we are often shooting in the dark when it comes to salary. We can (maybe) get information from friends, colleagues. professional associations, etc., but that information is hard to use in a negotiation (it canbe effective at bumping up yourpay if presented correctly, but that doesn't help anyone else applying for that job or similar jobs since they may not have equal access to that information). That's not the case with these guys. They go in and have hard numbers. They can point to another CEO at a comparably sized company and say, "That guy is making $1.2 mil. I need at least $1.3 + some stock options, since I am far more qualified (have more expertise, will do amazing things, etc.)!"

Soon enough, the salaries of those positions bloom beyond what is reasonable. Other benefits (golden parachutes) get tacked on that aren't available to the lower tiered worker. A company doesn't want to be known as a miserly bunch that pays its executives LESS than their competitors!

Unintended consequences.

Re: Basic Economics (Score: 1)

by on 2015-08-13 14:22 (#H9F4)

I hadn't thought of that, but what you say makes sense. It's easier to negotiate salaries up than down, in general. There's a perception aspect to salaries anyway, especially when the economy is doing well. You don't want to lose people to competing firms, so you try to pay a little higher. Everyone else does it too, and suddenly everyone is overpaying for relatively shittier quality personnel.

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