Posted by: Jena McGregor on April 07, 2009
Everywhere you look recently, the headlines say CEO pay is going down. Last week, the Wall Street Journal’s annual survey found that median salary and bonuses for CEOs of 200 big U.S. companies fell 8.5% last year. Over the weekend, the New York Times’ study, which uses data from compensation research firm Equilar, found that median total compensation was down 9.4% last year. Equilar released its own press release today, saying that overall CEO pay fell by 6.8% from 2007 to 2008, the first significant drop in seven years. That was driven mostly by steep drops in cash bonus payments, the firm noted, which dropped 20.6% over the same period.
But hold on a moment. Now comes a preliminary “sneak peek” report on executive pay from The Corporate Library. Its compensation analysts randomly selected 21 companies who filed their annual reports between January and mid-February and found something different. The Maine-based governance watcher, which plans a comprehensive report this summer, found that among these 21 companies, base salaries actually increased 7.5%. While the preliminary study doesn’t report total compensation declines or increases, the study authors do note that some companies—mentioning Monsanto, Tyco and Apple—continued to pay out substantial bonuses or vest lucrative equity awards.
Even more notable were adjustments made to bonus targets. The Corporate Library’s report mentions that at Navistar, D.R. Horton and Analog Devices, bonus targets or metrics were adjusted so that they might be more easily achieved in a tougher environment. “With a general weakening of the target-setting process,” wrote report author Paul Hodgson, a senior research associate, “any decline would seem unlikely to reflect accurately the decline in company fortunes.”
One other notable finding from the study: At least two companies explained part of their salary increases as the result of consolidating perks into salary-based pay. Natural gas distributor and provider UGI said in its proxy that its CEO’s “salary increase includes a modest adjustment to compensate for the discontinuance of certain perquisites as reported in Fiscal 2007.” And at Provident New York Bancorp, 3.2% of the CEO’s salary increase was paid out “in lieu of a country club membership and a vehicle.”
The Corporate Library’s study is small in scale, to be sure, and it will be interesting to see if their findings hold as they broaden their study. But they aren’t the only ones to find that pay may still be going up. Executive compensation expert Graef “Bud” Crystal finds that total pay actually went up 2% in 2008 in his study of 64 large companies that have market caps of at least $10 billion and where the CEO has been in place for two years or more. “What?” Crystal writes in his report. “You expected CEO pay to drop? Get real.”
Everybody was SO mad about the recent bonuses that were given from bailout money. Now, I can understand (sort of) that taxpayer money shouldn't go to nonperformers. However, a management person's bonus is an agreed upon portion of his total compensation. If he doesn't get the bonus that he was entitled to based on whatever this agreement was, then that's like docking his pay.
If he doesn't meet the bonus requirements, then he shouldn't get the bonus. But if he does, then he SHOULD get his bonus.
You talk about transparency. These people do not want tranparency, because if there is, they then have to explain these increases to the public and their shareholders. What stress that would cause. These shareholders have to pay attention because that is what is at a premium here. Transparency is the corporations worse enemy. Look at all the corporations that hid behind the money AIG was paying out and saying they didn't need Government money. Until a congressman spoke out and said you have to show the American people where their money is flowing and pressure grew, did they finally show all the corporations that received government money laudered thru AIG. How convenient. And Kudlow talks about class warfare. Hea, Mr. Kudlow, who is continuing this class warfare. It will end when there is transparency, if there is no transparency then they are hiding something because they are afraid.
Pay increases for execs has increased as offshoring/outsourcing of the rank and file employees has increased.
Gena, you are another blind writer who is portraying a mysterious C level salary measure in global business. Please, they're all available on Forbes.com with a stock symbol search, you just click on "Executives" after the company comes up and you can see that American executives especialy moved their personal fortunes to the inside and we have a horde of SVPs who are making $10M a year w/their guaranteed stock dividend payout. Base salaries are meaningless as in a recession these dividends are coming from the company's till because any $$'s earned from stock ownership at street value would be a devastating loss to these executives. For example, type in JAVA on a Forbes.com stock symbol search and click on Executives on the left, then click on the name, and you'll see a $40M interior at SUN Microsystems, which is why IBM ran the other way. It's across the board in the Fortune 100/500. Here's SUN (cut and paste it in), the feeds are SEC: http://people.forbes.com/search?name=&ticker=JAVA
If the shareholders of the company want to pay huge salaries, benefits and perks to senior executives then let them. BUT let the real owners of the companies (shareholders) make the decisions on total compensation.
What would happen if ALL the overly generous compensation packages which are supposedly driven by market forces, were right-sized by the shareholders and shareholders paid themselves a larger dividend?
All the overpriced senior executives would have to go to work in Hollywood or play professional sports to earn the size payday they would have us all believe they are worth. I suspect many don't have the talent to make it in front of the camera or on the field, just as many don't have it in the workplace.
Angela..there-in lies the rub.
1. if the companies were allowed to go bankrupt, they would have NO money to pay any bonuses.
2. the 'reason' given by the companies that the bonuses were 'necessary' is what angered more people. "needed to attract and retain the top talent"... 11 of the AIG executives with bonuses over $1m NO LONGER WORK FOR AIG. how is that retaining or attracting them? Also if they caused the mess there is no way they could have 'performed'.
One big issue that's coming to light ist he short term goals. One trader had mentioned that if he makes $100m profit for the company in a year he's entitled to 1% of it. I would agree IF that $100m was 'sustainable', not the sense of repeating that performance every year, but if I sell all the assets of the company off and make $100m 'profit', or if I make $100m in fee premiums by underwriting $1 TRILLION in CDS that come due in the next 5 years, the NO, I have NOT performed and am NOT entitled to the 1%.
Also the objectives to get the bonus seem to be achievable in any environment. Sink the company? that's still entitles you to a 'bonus'. Make a loss in your divison? Still entitles a bonus. Stock price dropped 50%? no problem we'll give you 100% more stock options.
As a shareholder I think this is all becoming a bit more than an embarrassment and more like a full blown scandal.
If US corporations are paying executives for 'services' and not results (profits, dividends) then there's little wonder why the financial service firms are performing the way they are.
However, its going to take shareholder dissatisfaction expressed loudly and repeatedly to change these habits.
I'm sorry but if a company is supposedly trying to cut costs, largely a CEO decision, He/She should not be taking bonuses or getting raises. Especially with companies that have had any recent layoffs, or took away 401k contributions, or refuses to upgrade necessary equipment, or even repair necessary equipment.Take UPS for example. http://tinyurl.com/cywu4q As an employee and stockholder, this really burns me. Folks we don't have tape or boxes to repair or secure your boxes. 90% of our scanners do not work or barely do. Though layoffs have been minimal you cannot justify that kind of increase. Scott Davis should be ashamed of himself.
Fire all CEO's and Hire new CEO's with new contract reflecting the new realities.
What a company wants to pay their CEO is their business. People that want to continue working for a company that pays millions to CEO's... well that's their business too. If you don't like it, buy some stock, go to the meeting, get together with other share holder's, and vote out the board, and fire the CEO. As for bail out companies... Every CEO should be paid minimum wage until their company pays back the loan.
The money used to pay these sky high packages to executives has to be matched with the lack of money to spend on essential things to get these companies competitive.
For example you can today purchase cars made by the big three US automakers with push rod engines (this is an old technology replaced by overhead cam which has been in mass procution cars over 30 yrs ago. The overhead cam engines are more efficient and give the foreign automakers a competitive edge)
I find it interesting that this article would use data from 21 "randomly selected" companies to counter trends observed in surveys of 200+ companies produced by the WSJ, NYT and Equilar. The 21 company study also simply looked at base salaries and not total compensation. This seems like an attempt to compare apples and oranges for the sake of creating a good headline.
I really don't see the big deal with CEO pay. Why the heck does anyone care what their neighbor makes? It's NONE OF MY or YOUR business. I could care less if Apple or Microsoft decided to pay their ceo 10x what they're getting paid.
This is a SHARE HOLDER ISSUE NOT A GOVERNMENT issue!
At the end of the day, this is an issue of supply and demand. Therea re very few top rated CEOs/executives who can lead a multinational company through these turbulent times. In addition, whilst base comp may be up, bonuses will probably form less of total comp, as investors/stakeholders focus more on the extravagant and obscene bonuses we have seen in recent years.
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If companies can pay exec's huge bonuses then they need to give out huge dividends to their shareholders. furnace filters air conditioner filters web hosting
Shareholders should demand dividends! I can understand that CEO's and executives make a company run but the shareholders and what help a company grow. If it wasn't for them there wouldn't be a company. furnace filters air conditioner filters web hosting
i agree with eric bowser...
shareholders should demand dividends..
I think that the main focus should be on how these guys' bonuses are calculated. In the excesses of 2000-2006, some CEO's were getting $10m, $20m or more each year - this is obscene and needs to change.Forex VPS
Prince Riley is right.
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They should really demand dividends.
I really don't see the big deal with CEO pay. Why the heck does anyone care what their neighbor makes? It's NONE OF MY or YOUR business.
nice article. and I think they have to demand dividens.
I find it interesting that this article would use data from 21 "randomly selected" companies to counter trends observed in surveys of 200+ companies produced by the WSJ, NYT and Equilar. The 21 company study also simply looked at base salaries and not total compensation. This seems like an attempt to compare apples and oranges for the sake of creating a good headline.
Bonuses are fair. Its just the emotional climate that makes everything so combustible. Sigh...
With all this financial crisis all the sales are down no matter what niche we are talking about. For example you can now purchase vehicles made by the big three US automakers with push rod engines (this is an ancient technology replaced by overhead cam which has been in mass procution cars over 30 yrs ago. thanks.
I agree 100% with Omer here. This is a share holder issue.
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they Need to divide ends with their shareholders
Quite a nice post on CEO..
I wonder if they are always paying down at this limit!
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A good post indeed!
Everybody was SO mad about the recent bonuses that were given from bailout money. Now, I can understand (sort of) that taxpayer money shouldn't go to nonperformers. However, a management person's bonus is an agreed upon portion of his total compensation. If he doesn't get the bonus that he was entitled to based on whatever this agreement was, then that's like docking his pay.
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Whatever a company decides to pay their CEOs is unimportant as is the format that they use to calculate such a payment. Top CEOs require top dollars.
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I agree with TriviaChamp, a good CEO costs money. Good managers are hard to find. Don't believe me? Look at our incompetent government. They're supposed to be the "best and the brightest" but they don't manage people, money, or resources well at all. That's why a great leader and manager is worth her/his weight in gold.
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All the overpriced senior executives would have to go to work in Hollywood or play professional sports to earn the size payday they would have us all believe they are worth. I suspect many don't have the talent to make it in front of the camera or on the field, just as many don't have it in the workplace.
However, a management person's bonus is an agreed upon portion of his total compensation. If he doesn't get the bonus that he was entitled to based on whatever this agreement was....
The major problem with bonus target is that they were too short term. E.g. if your bonus gets larger the more risk you take on the upside then you will take more risk. Also it is very short term, e.g. take for example a pharma company, you could immediately improve your profit by cutting R n D to 0 but long term your company will go under.
nice article. and I think they have to demand dividens.
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Thanks, nice article!
Agreed, why isn't the SEC doing something here? Let shareholders of the company determine if they approve and authorize to pay huge salaries, benefits and perks to senior executives. lisa slim
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Great article, I think I've changed my mind about a few things since reading this...
Well, this article hs been written about a year ago. Actually I think CE0's salaries has decrease mainly because of the new debts that some big companies that have been bailed out by the government. We respect CEOs, they are not average worker, they should be payed accordingly but they should also not have an outrageous salary when taking into consideration the economic situation of the country.
It's all about the fringe benefits CEOs have. Their salary is minuscule compared to the benefits.
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If the CEO is really doing that great a job at the company, then he/she should be compensated handsomely. This is America, the land of capitalism. If you are good, then you should be rewarded.
CEOs don't do an average job, and they don't deserve average compensation.
Well, the classic word that best describes a company who doesnt pay well, is none other than, .. cheating
its popular to be against ceo and option payment, but don't forget they will create the jobs !
i do also create jobs !
CEO's need to accountable salary-wise. No performance should equal no bonus.
By definition bonuses should be direct-linked to performance.
i would like to have steven schwarzman's job and earn 300 million $ a year !!!!
They should take example of Citigroup's CEO Pandit who vowed to take a token salary of only $1 and no bonus until the bank gets back on its feet... now that's what i call responsibility..
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What would happen if ALL the overly generous compensation packages which are supposedly driven by market forces, were right-sized by the shareholders and shareholders paid themselves a larger dividend? Hostgator
I agree with Robert Riley, there should be more CEO's like the one at city group. I think their salaries are inflated and it gives them big egos and too much power to do corrupt things especially in the recession we are experiencing.
Some of these CEO's get paid way to much. I understand they have a huge obligation but sometimes it's a bit over the top.
In a way it makes sense that the CEO pay isn't going down now that the economy is slowly starting to recover.
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It's all a balancing act. If the total package is not good enough then failure to recruit or retain top exec but in todays depressed economic climate it is only right that the packages reconsidered.
How many of the CEO's really deserve all that money? I mean, will the company go under if the CEO leaves?
The CEOs never want to do this. They love their fat paychecks too much. acai berry
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I think that modern CEO`s are not held accountable for what they do, and how well they do it. There should be a better measurement about the degree of their success, which should be clearly announced every few months somewhere in the company. So everyone can see how well a certain CEO is doing his job. Maybe a rating system of some kind.
CEOs are leaders and leaders will always be well paid and hence in demand in the long run. What is important is good interpersonal communication skills that is essential in most jobs. When the economy recovers, the pay of CEOs will probably shoot back up again.
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jimmy is right.Mentioned above post CEO should be pay bonuses etc to their performance.
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there should be more CEO's like the one at city group. I think their salaries are inflated and it gives them big egos and too much power to do corrupt things especially in the recession we are experiencing.
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I'm a casualty of corporate greed. The question people should be asking is how much money does one person really need? Why should a CEO or any Exec for that matter be paid millions for under performing? How can companies cut back while overpaying CEO's? Most of these big Wall Street firms spend millions on nonsense, then turn around and say they need to cut back on employees!
Well I must say the managers who are at higher level are the ones who are most affected.They had to lose their job because their salaries were just too much and so were asked to leave or their pay was cut down.
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What is the big deal here? A company can pay just about anything it wishes to its CEO. If the CEOs are paid bonuses, what is wrong with that? Even if it is wrong it is for the company to face the consequences. And just as Angela says, if the company originally agreed to pay those bonsues to the CEO then it cannot go back on the agreement. Of course, not every company's CEO may qualify for the perks but again, that is for the company to decide.
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How many CEO's do you let scam the American people? This CEO compensation is getting so out of hand and the tax payers are getting the brunt end of the deal! Stop Being So Tired
If CEO is eligible to receive perks than there is no doubt company has to give it but this should be mentioned in agreement. Freeze Dried Backpacking Food
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Anybody who believes CEO pay is down is not in tune with society... point blank period. This article doesn't surprise me at all, and its a real shame.
The majority of CEO´s are well overpaid and do not deserve this amount of pay. They only get it because they have been at the company and are therefore considered part of the furniture. Oh well what can we do ?
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Well I understand what this blogs speaks about CEOs wages being cut down....but in actual I dont think so...because even after cutting their half salary down they still get loads of money...enough to make them satisfied... Best Teeth Whitening Teeth Whitening Teeth Whitening
I think that there should be a young brigade of CEOs. Noone above 50
We should just let the banks fail. That should easily stop the risk taking culture.
I am not surprised their salaries did not really drop. Terrible
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These people do not want tranparency, because if there is, they then have to explain these increases to the public and their shareholders. What stress that would cause. These shareholders have to pay attention because that is what is at a premium here. Transparency is the corporations worse enemy. Look at all the corporations that hid behind the money AIG was paying out and saying they didn't need Government money.voip phone service
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Well I understand what this blogs speaks about CEOs wages being cut down....but in actual I dont think so...because even after cutting their half salary down they still get loads of money..
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My grandfather is a ceo of a rather large firm, and he recently took a steep pay cut. I think it's because of the economy.
Great post!
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I think that everyone is taking the hit from the crisis from the small guy to the big guy. The only people benefiting from it are the really big ones.
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Great article. I wish the media would talk more about these greedy bastards.
Everybody was SO mad about the recent bonuses that were given from bailout money.
These shareholders have to pay attention because that is what is at a premium here. Transparency is the corporations worse enemy.
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Fantastic article, loved reading it. CEO's get paid way to much, I wish I was one :)
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I agree, shareholders need to pay closer attention.
depends on what king job they do!
They're bonuses were already configured before this all happened. The money was already spent!
During this recession period the higher position person's are effected most.Because company is not able to afford to give them huge amount of salary that is why they are asked to leave.
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Of course ceo's salary is affected, so is everyone else's.. the economy doesn't pick and choose.
Yep, my uncle just lost his job. He wasn't a CEO but close to it, Executive Vice President.
Their salary should be affected. Why wouldn't it.
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shareholder have to pay more attention...In order to get profit....
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ceo get more than they needed
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Bonus payments remain an inscrutable part of executive compensation. They're the portion of an executive's pay most closely tied to annual performance. Yet boards have a lot of discretion; some use formulas, others rely on judgment. Payouts may also be tied to goals -- like retaining executives or promoting diversity -- that aren't related to profitability, yielding awards even when earnings sag. In general, bonuses aren't closely tied to stock prices.
Bonus payments remain an inscrutable part of executive compensation. They're the portion of an executive's pay most closely tied to annual performance. Yet boards have a lot of discretion; some use formulas, others rely on judgment. Payouts may also be tied to goals -- like retaining executives or promoting diversity -- that aren't related to profitability, yielding awards even when earnings sag. In general, bonuses aren't closely tied to stock prices.
I think that these ceo's get too much then they need
What a company wants to pay no prescription pharmacy their CEO is their business. People that want to continue working for a company that pays millions to CEO's... well that's their business too. If you don't like it, buy some stock, go to the meeting, get together with other share holder's, and vote out the board, and fire the CEO.
CEO's get paid so much it doesnt matter to them if they get there pays slashed they have other ways of making money anyway
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Yes only time goverment should get involved is if it has been saved or a loan has been given by the goverment otherwise it is not there matter to deal with
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It's funny because the drop in salary still makes it several orders over what most middle class individuals will make in a lifetime. I'm not arguing their value at least to the marketplace, but it's not all that significant relatively speaking.
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I really don't see the big deal with CEO pay. Why the heck does anyone care what their neighbor makes? It's NONE OF MY or YOUR business.
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I totally agree with this article because they are getting more that that required
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I think that it is wrong for one person to earn this much while other workers are struggling.
Some of these CEO's get paid way to much.
Same as politicians I guess. There's nothing much we can do
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I think the ceo pay should be according to the companies performance, which I think is a mirror of the ceo. It should be set at his contract signing.
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Share it dow to the shareholders I say. You know...the people that keep the company moving forwards!
Share it dow to the shareholders I say. You know...the people that keep the company moving forwards!
Even if it is wrong it is for the company to face the consequences. And just as Angela says, if the company originally agreed to pay those bonsues to the CEO then it cannot go back on the agreement.
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I think the ceo pay should be according to the companies performance, which I think is a mirror of the ceo.
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It's all effect of recession. Previously they are getting much more because world economy is booming but now the period of recession.
It's all effect of recession. Previously they were getting much more because world economy was booming but now the period of recession.
It's all effect of recession. Previously they were getting much more because world economy was booming but now it's the time of recession.
CEO Pay down? Give me a break. CEO pay is never going down.
Even in the worst of times it will remain the same.
What a company wants to pay their CEO is their business. People that want to continue working for a company that pays millions to CEO's... well that's their business too. If you don't like it, buy some stock, go to the meeting, get together with other share holder's, and vote out the board, and fire the CEO. As for bail out companies... Every CEO should be paid minimum wage until their company pays back the loan.
Bonus payments remain an inscrutable part of executive compensation. They're the portion of an executive's pay most closely tied to annual performance. Yet boards have a lot of discretion; some use formulas, others rely on judgment. Payouts may also be tied to goals -- like retaining executives or promoting diversity -- that aren't related to profitability, yielding awards even when earnings sag. In general, bonuses aren't closely tied to stock prices.
Last time I checked, we lived in a capitalist society. Supply and demand should dictate what CEOs (or anyone for that matter) should be getting paid. The market should dictate how much is "too much" and correct itself.
I like it how Miley Cyrus has made a comment, I'm pretty sure its actually her!
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CEO Pay is NEVER going down! Cut credibility some slack!
Morgan James... I must agree with you... pay them MINIMUM WAGE!... I love it
And lol @ Miley Cyrus.. never knew she had so much spare time
Morgan James... I must agree with you... pay them MINIMUM WAGE!... I love it
And lol @ Miley Cyrus.. never knew she had so much spare time
pay them MINIMUM WAGE!Here here!
here, here! Pay them MINIMUM WAGE!
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The bailed out banks should be regulated in their compensation package.Its our money.
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We should not reward excessive risk.
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The majority of CEO´s are well overpaid and do not deserve this amount of pay. They only get it because they have been at the company and are therefore considered part of the furniture.
I think there should be some level of cap in place... I find it crazy to believe that some of these insane salaries get passed by the shareholders in the first place!
Hey, These salaries are performance based. They wern't just flat fees for nothing. They were open ended based on their performance.
CEO pays should depend on their work and business strategy.If they increase the annual revenue of the company.
This is not right CEO deserve what they get celebs and footballers should be the ones who get pay cuts!
people at the top will always be the elite
Everybody was SO mad about the recent bonuses that were given from bailout money. Now, I can understand (sort of) that taxpayer money shouldn't go to nonperformers. If he doesn't meet the bonus requirements, then he shouldn't get the bonus. But if he does, then he SHOULD get his bonus.
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Managers are the ones who lose more wen their is any crisis.They are the worst affected.
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Hard to figure out what is going on really, have they gone up or down? So many studies on small samples seem to "prove" one thing or another...
CEO's are not the issue Obama has the wrong end of the stick!
high level CEOs should think if their salary is just too high in the current climate
I hope they start to go down. Let them see how the rest of America feels. Where I'm from, minimum wage just DECLINED. No one wants to help the underdogs.
Its all because of the recession.But no worries some or the other day there will be once again a booming economy.
Its all because of recession. But no worries sooner or the later it will be a booming ecenomy once again.
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If the business tanks or losses money they should have to get pay cut or something at least.
The economical situation has it own way to bounce back and return is all about a cycle.
Get ready for all this mayhem to start again. As we begin bonus season (yes it is underway already for the Jan & Feb payouts) this noise will increase...
Get ready for all this mayhem to start again. As we begin bonus season (yes it is underway already for the Jan & Feb payouts) this noise will increase...
No bonus if they don't meet the requirements. Easy.
people at the top will always be the elite
high level CEOs should think if their salary is just too high in the current climate
Its all because of recession. But no worries sooner or the later it will be a booming ecenomy once again.
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Its all because of recession. But no worries sooner or the later it will be a booming ecenomy once again.
Bonuses must be based on performance and if the requirements are met.
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The economical situation has it own way to bounce back and return is all about a cycle.
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If the business tanks or losses money they should have to get pay cut or something at least.
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Get ready for all this mayhem to start again. As we begin bonus season (yes it is underway already for the Jan & Feb payouts) this noise will increase...
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How can you manage smarter? BusinessWeek writers Nanette Byrnes, Patricia O’Connell, Emily Thornton, Matthew Boyle, Michelle Conlin and Diane Brady synthesize insights from the brightest business thinkers, critique the latest management trends, and comment on leaders in the news.