Outrageous CEO compensation
January 27, 2011
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I don’t understand why shareholders can’t have a say in CEO compensation. Afterall, they own the company and the CEO works for them. Having your overpaid CEO friends on the board of directors to decide your salary is like having other convicts to decide another criminal’s sentencing. It may not be practical to get all shareholders to agree on a compensation package. But I think we can all propose a better approach for CEO compensation that’s performance based. One of the top of my head is… if the company averages 100 millions profit per year in the past, then let’s offer the CEO say 0.5% of the profit. That’s a very good base salary of $500,000/year. If the company makes more, he makes more. If the company loses money, then he’ll make less, now that’s real incentive to perform. There’s a reason why salesman, insurance, and real estate agents all work on commission. No says they’re overpaid, because there’s tons of competition for those jobs. Why can’t CEOs?
Probably, at the generous 0.5% of the profit, the CEO is still overpaid. I would really love to run a social experiment to compare performance of one of the overpaid CEOs against one of those smart, common sense, business savvy contestants from the Apprentice show…I mean one of the good ones…to expose the fact that there are plenty of people capable of doing the same job and willing to work a lot less. They can even make a reality show out of it. But the problem is it’s almost impossible to do it, that’s why free market is often not exercised at higher level due to barrier to competition. But anyone can start a chinese restaurant to compete, if he sees another chinese restaurant that is overpriced and making easy money. That’s why you don’t see any chinese restaurant that charges $20 for chinese fast food… at least not in Vancouver.