UK Executive's Pay Rises 55%.

[Big Orange]

Amongst the civilised world it's not only America that partcipates in very greedy, almost mutiny instigating corporate asshattery. While the private sector sheds workers, public spending is slashed, and food parcels are distributed amongst the most needy, the boardroom executives are unsurprisingly well insulated from the worst of the recession and sucking even more wealth from the stalling gravy train:

UK boardroom pay leaps 55% in a year
'Don't they know that this is meant to be austerity Britain?' said TUC general secretary Brendan Barber

Britain's bosses have been accused of greed and ignoring economic reality after boardroom pay leapt by 55% over the last year.

FTSE 100 directors saw their total earnings soar in the 12 months to June, thanks to sharp rises in bonuses and performance-related pay. The average FTSE 100 chief executive now earns £4.9m a year, or almost 200 times the average wage.

Unions reacted angrily to the report today. "Don't they know that this is meant to be austerity Britain?" said TUC general secretary Brendan Barber.

"These mega-pay rises blow away any claim that we are all in this together. While the poor and those on middle incomes lose out from cuts and pay squeezes, top directors continue to take home telephone number salaries without being overly troubled by tax," Barber added.

He called on shareholders and the government to get a tighter grip on executive pay, at a time when ordinary workers have seen their pay kept in check by the economic downturn.

The report was welcomed by business secretary Vince Cable, who announced a review of corporate behaviour and pay earlier this week. He said it was time for executive pay to "come back down to earth".

"We have to question whether it is linked closely enough to company performance. I'm determined to take a really close look at these important issues and want to see a wide response from industry to my review," Cable said.

Incomes Data Services, who conducted the research, said bonuses paid to directors of FTSE 100 companies increased by 34%, while basic pay rose by 3.6%. The amount of money waiting to be disgorged from long-term incentive schemes soared by 73%, to a total of £259m, and share option gains leapt by 90%.

The FTSE 100 rose by less than a fifth over the same period.

Steve Tatton of IDS said the report suggested that companies returned to "business as usual" once the recession ended.

"It seems the days of earnings restraint were short-lived. It is as though the recession never happened," Tatton warned.

"This time last year a number of companies actually reduced their bonus ceilings. Twelve months later it appears as if these measures have been reversed, with around 40 companies reporting higher bonus scheme maxima," he added.

Bart Becht, who runs consumer goods giant Reckitt Benckiser, was the most highly paid FTSE 100 chief executive. He made £90m last year. IDS also calculated that Tony Pidgley of Berkeley Group enjoyed total earnings of £38.4m, followed by Mick Davis of Xstrata with £26.9m. All three benefited from share options granted in previous years. Paul Kenny, general secretary of the GMB union, said "boardroom greed is alive and well", adding that several FTSE CEOs have come out in support of the coalition government's deficit-reduction plans.

"Let us not forget that these are the same people urging the Government to make deep cuts in jobs and services and in the welfare on which the poorest in our society rely," Kenny said.

In calculating total earnings IDS includes a range of payments and benefits, including the notional and actual value of share option gains, and the total cash value of long-term incentive plans.

A year ago, IDS's report found that total earnings among FTSE 100 CEOs fell by 1.5% between June 2008 and 2009, in the teeth of the recession. However, a 7.4% rise in basic pay cushioned bosses from the impact of the downturn.

Several of Britain's biggest companies faced shareholder anger this year over their executive pay awards. Tesco suffered one of the biggest revolts in years when nearly half its investors failed to back its remuneration policy.

Marks & Spencer was criticised for giving its new chief executive a £15m deal, while J Sainsbury had to defend a 60% rise in CEO Justin King's total earnings, which jumped to £8m.

The Guardian

[Highlord Laan]

Get a rope!

That out of the way, I'll own up to being almost sickened by bullshit like this. Their entire life of "Get Rich or Die Trying" and "Screw All of You, I Got Mine" is completely appalling, even more so since they;re profiting off other people's misery and sorrow.

And I bet they bemoan how they're (justifiably) hated too. Bastards.

[The Kernel]

Supply and demand. It may sound like outlandish sums of money to pay top executives, but it's really peanuts compared to the value that they can deliver. If one wants to see an example of this take a look at Nokia--a company with tons and tons of smart people, crushing amounts of marketshare, one of the top consumer brands in the world and ridiculous levels of revenue...yet by all intents and purpose they are dying and losing billions of market capitalization because of a lack of vision by their upper management.

People who complain about executive compensation really miss the point--they are paid this much because they are expected to deliver many times this much in revenue via new product vision.

[adam_grif]

My favorite is the "I WORK HARDER THAN ANY CEO THEY SHOULDN'T GET PAYED MORE THAN ME" kind of people, like my dad. Classic comedy.

[Alphawolf55]

Supply and demand. It may sound like outlandish sums of money to pay top executives, but it's really peanuts compared to the value that they can deliver. If one wants to see an example of this take a look at Nokia--a company with tons and tons of smart people, crushing amounts of marketshare, one of the top consumer brands in the world and ridiculous levels of revenue...yet by all intents and purpose they are dying and losing billions of market capitalization because of a lack of vision by their upper management.

People who complain about executive compensation really miss the point--they are paid this much because they are expected to deliver many times this much in revenue via new product vision.

All well and good except the fact these executives make far more then most, and make enough that even if they only work a few years and get canned,they're still set for life.

Not much motivation when your two choices are succeed and be exceedingly rich and fail and be modestly rich.

[The Kernel]

All well and good except the fact these executives make far more then most, and make enough that even if they only work a few years and get canned,they're still set for life.

Not much motivation when your two choices are succeed and be exceedingly rich and fail and be modestly rich.

With that kind of pay comes a different sort of lifestyle expectation. There is actually a difference between having enough money to be comfortable and enough that you can fly everywhere on private jets for the rest of your life and blow seven figures on a birthday party.

[The Kernel]

My favorite is the "I WORK HARDER THAN ANY CEO THEY SHOULDN'T GET PAYED MORE THAN ME" kind of people, like my dad. Classic comedy.

What most people fail to realize is that hard work doesn't necessarily define success. If I lead my organization to 10%+ yearly growth I could be playing golf five days a week for all my superiors would care--it's all about results when you are in upper management.

[Fingolfin_Noldor]

All well and good except the fact these executives make far more then most, and make enough that even if they only work a few years and get canned,they're still set for life.

Not much motivation when your two choices are succeed and be exceedingly rich and fail and be modestly rich.

With that kind of pay comes a different sort of lifestyle expectation. There is actually a difference between having enough money to be comfortable and enough that you can fly everywhere on private jets for the rest of your life and blow seven figures on a birthday party.

How does that address the problem of corporate accountability which remains a core issue when it comes to executive pay?

[The Jester]

If one wants to see an example of this take a look at Nokia--a company with tons and tons of smart people, crushing amounts of marketshare, one of the top consumer brands in the world and ridiculous levels of revenue...yet by all intents and purpose they are dying and losing billions of market capitalization because of a lack of vision by their upper management.

As someone who has worked for Nokia both internally and as an on-site subcontractor, I can firmly say that this is a load of horseshit.

People who complain about executive compensation really miss the point--they are paid this much because they are expected to deliver many times this much in revenue via new product vision.

As compared to the engineers in R&D that make the shit actually happen. "Vision" is a drop in the barrel compared to the countless hours put in by teams of researchers.

Furthermore, the original article states that their compensation has increased by 55% over the past year while the middle class is still losing out. Are you seriously going to argue that executive performance has improved that dramatically over the past year when everybody else is losing?

If we look at actual studies into CEO compensation, we can see that their compensation levels are grossly misaligned with any realistic calculation of what they should be earning. But this isn't too surprising considering that the people that evaluate their performance tend to also be their golf buddies.

[The Kernel]

How does that address the problem of corporate accountability which remains a core issue when it comes to executive pay?

What do you mean by "corporate accountability"? Accountability to the shareholders or someone else?

And who says it has to address it? I'm simply stating a fact about what drives executive compensation and the logic behind it, nothing more. There is nothing inherently wrong with large executive salaries, even in an economic slump--heck it's probably more important than ever to attract the best talent to open up new markets and turn around flat growth.

[The Kernel]

As someone who has worked for Nokia both internally and as an on-site subcontractor, I can firmly say that this is a load of horseshit.

And as someone who has worked with Nokia on several projects at much higher levels of management then you have I can firmly say that you are wrong. Nokia's problems are directly related to the fact that they fucked up on their smartphone strategy and kept a death grip on Symbian when they should have been pushing forward on a next-generation of operating system.

Nokia also has grand ideas about becoming a services organization and leveraging their brand and retail presence in developing markets but they have so completely squandered this advantage through sheer executive incompetence.

I could go off on the dozens of other missteps that Nokia has made (such as trying to take on Qualcomm in an IP pissing contest which has helped no one and has served to shut them out of the lucrative US market) but I think I've made my point.

As compared to the engineers in R&D that make the shit actually happen. "Vision" is a drop in the barrel compared to the countless hours put in by teams of researchers.

Umm...no, sorry but that's completely wrong. Engineers don't just start shipping new products without direction--those decisions are made at the highest level of management. When a company decides to invest in a new product or to branch out its portfolio of products/services it is done because of a very calculated decision made by the executive team. You clearly have no firsthand knowledge of how a modern organization is run.

Furthermore, the original article states that their compensation has increased by 55% over the past year while the middle class is still losing out. Are you seriously going to argue that executive performance has improved that dramatically over the past year when everybody else is losing?

I'm saying that in a period of a slumping economy, business units require strong leadership in order to maintain growth rather than just mediocre management to ride good economic conditions. This increases demand which drives up the price of top shelf talent.

Is this really that hard to understand?

If we look at actual studies into CEO compensation, we can see that their compensation levels are grossly misaligned with any realistic calculation of what they should be earning. But this isn't too surprising considering that the people that evaluate their performance tend to also be their golf buddies.

That study does nothing to address actual value of top executives and instead simply postulates that executive pay should have a tighter correlation to standard employee pay. Sorry but that's not how it works--executives are compensated based on the actual or anticipated value that they will bring to the income of the company not based on fairness.

[Fingolfin_Noldor]

How does that address the problem of corporate accountability which remains a core issue when it comes to executive pay?

What do you mean by "corporate accountability"? Accountability to the shareholders or someone else?

And who says it has to address it? I'm simply stating a fact about what drives executive compensation and the logic behind it, nothing more. There is nothing inherently wrong with large executive salaries, even in an economic slump--heck it's probably more important than ever to attract the best talent to open up new markets and turn around flat growth.

Logic? That assumes that that the process of choosing an executive was done rationally, but that isn't true all the time.

[The Kernel]

Logic? That assumes that that the process of choosing an executive was done rationally, but that isn't true all the time.

Oh gee, what a scathing rebuttal you have there.

A company may choose to promote for reasons other than merit but if they do and the person fails to deliver then they are up shit creek. When it comes down to it even the CEO has a boss (the board of directors) and if they fail to meet or exceed expectations then they are going to be out of a job.

[Fingolfin_Noldor]

Logic? That assumes that that the process of choosing an executive was done rationally, but that isn't true all the time.

Oh gee, what a scathing rebuttal you have there.

Oh Gee, look who's feeling all defensive.

A company may choose to promote for reasons other than merit but if they do and the person fails to deliver then they are up shit creek. When it comes down to it even the CEO has a boss (the board of directors) and if they fail to meet or exceed expectations then they are going to be out of a job.

Again, this returns to the problem of corporate accountability. Lehman Brothers collapsed because the executive management failed to see a problem until it was too late. And while that happened, these people were paying themselves fat cheques and enriched themselves. And that didn't stop many of these so-called "value-added" executives from finding high paying jobs elsewhere. Let's face it. Industries as a whole are filled to the brim with cliques etc. and connections often matter more than anything else.

[The Kernel]

Again, this returns to the problem of corporate accountability. Lehman Brothers collapsed because the executive management failed to see a problem until it was too late. And while that happened, these people were paying themselves fat cheques and enriched themselves. And that didn't stop many of these so-called "value-added" executives from finding high paying jobs elsewhere. Let's face it. Industries as a whole are filled to the brim with cliques etc. and connections often matter more than anything else.

You'll have no argument from me that shareholders need greater visibility into corporate accounting in certain sectors. But let's face it, Lehman Brothers happened because even the damn credit agencies that were supposed to watchdog this sort of thing weren't able to make sense of these exotic financial derivatives. No one who was following Lehman's performance had a clue that the company was going down until right before it happened (this actually is pretty typical for investment banks, as they tend to collapse fast and hard like a helicopter crash). This is a pretty specific problem to banking and investment banking sectors.

However, this doesn't apply to everyone else on the Fortune 500 list. It's pretty easy to read through a 10-Q of a company like Cisco or Microsoft and get a feel for how each business unit is performing.

In any case, the solution to these problems is not putting a cap on executive pay.

[Xon]

Supply and demand.

Ah yes, the Demand of the board of executives wanting more pay and the board of executives supplying said pay.

[Alphawolf55]

How does that address the problem of corporate accountability which remains a core issue when it comes to executive pay?

What do you mean by "corporate accountability"? Accountability to the shareholders or someone else?

And who says it has to address it? I'm simply stating a fact about what drives executive compensation and the logic behind it, nothing more. There is nothing inherently wrong with large executive salaries, even in an economic slump--heck it's probably more important than ever to attract the best talent to open up new markets and turn around flat growth.

There is nothing wrong with high salaries in good times. There is something wrong when everyone is losing jobs and you're laying off people and then getting a raise.

If people actually bring their value to a company no one else can that's one thing. But is there actual proof that these guys are so desperately needed and their job skills are so rare? Additionally, if they aren't improving their companies greatly do they really deserve raises?

[The Kernel]

There is nothing wrong with high salaries in good times.

Actually there is something wrong with it. In good times you don't need strong leadership to get decent growth so why overpay when you can settle for only decent executives?

There is something wrong when everyone is losing jobs and you're laying off people and then getting a raise.

Why is there anything wrong with this if both of these things serve shareholder valuation? Or do you think a corporation has any duties besides increasing shareholder valuation within the confines of the law?

If people actually bring their value to a company no one else can that's one thing. But is there actual proof that these guys are so desperately needed and their job skills are so rare?

The market for executives with proven success in driving growth and innovation while having relevant domain expertise tends to be pretty damn small. There just aren't enough good seasoned executives to go around and their pay reflects that.

Have you ever tried hiring a VP of Marketing, Engineering or Product before? I have. It's a fucking nightmare of a task and can take months or even years. Often the pickings are so slim that you are forced to poach people away from other companies which only drives up the cost more.

Additionally, if they aren't improving their companies greatly do they really deserve raises?

Of course not. But if they are then their compensation should be in line with the value that they deliver.

[Alphawolf55]

The problem is they haven't given shareholders their value. THey kept getting raises yet the markets crashed, additionally if you're firing people and saying 'we're losing money", how the hell is getting a raised justified? That's pretty much saying. "Well for 5 million I did a crappy job but give me 7.5 million and I promise to be a real pro!" Like I said before, CEOS have such ability to jump ship and even when they fail they make so much money that there's no real incentive for real competency. If they make horrible risk and succeed they get ridiculously rich, if they fail and cost shareholders millions, they still get rich.

[The Kernel]

The problem is they haven't given shareholders their value.

If they haven't then it is the duty of their shareholders to revolt and kick the assess out for not doing their jobs. If you are a shareholder and you don't feel confident that the value of your investment is being well spent then there is actually a remedy you can take.

THey kept getting raises yet the markets crashed, additionally if you're firing people and saying 'we're losing money", how the hell is getting a raised justified?

Sometimes increasing valuation means reducing headcount. Do you really need this explained to you?

That's pretty much saying. "Well for 5 million I did a crappy job but give me 7.5 million and I promise to be a real pro!" Like I said before, CEOS have such ability to jump ship and even when they fail they make so much money that there's no real incentive for real competency. If they make horrible risk and succeed they get ridiculously rich, if they fail and cost shareholders millions, they still get rich.

I already addressed this point. You may not see the difference between $10 million and $100 million but that doesn't mean than no one else can.

[The Jester]

And as someone who has worked with Nokia on several projects at much higher levels of management then you have I can firmly say that you are wrong. Nokia's problems are directly related to the fact that they fucked up on their smartphone strategy and kept a death grip on Symbian when they should have been pushing forward on a next-generation of operating system.

I've actually participated in the Nokia development chain and actually sees what's going on in the development process. I've also worked with NRC in the past. Categorising Nokia's problems as lack of vision upper management is severely one-dimensional at best. There are numerous organisational issues also involved with the actual product development process which lead to severe headaches for developers and researchers. E.g. Current recruitment into their Maemo and MeeGo development teams is a severe pain in the arse that has absolutely nothing to do with the vision of upper management.

A lot of the issues involved with sticking to Symbian also surround the working environment of Finland and the sheer number of Symbian developers working both for Nokia and the number of other subcontracting companies operating locally that also provide developer resources to Nokia. As result there is a significant amount of operational inertia behind Symbian that spans far greater than role that upper management plays.

As compared to the engineers in R&D that make the shit actually happen. "Vision" is a drop in the barrel compared to the countless hours put in by teams of researchers.

Umm...no, sorry but that's completely wrong. Engineers don't just start shipping new products without direction--those decisions are made at the highest level of management. When a company decides to invest in a new product or to branch out its portfolio of products/services it is done because of a very calculated decision made by the executive team. You clearly have no firsthand knowledge of how a modern organization is run.

Seriously? Where the fuck did I claim that engineers just clobbered projects together? The word "strawman" suddenly leaps to mind. Since you clearly failed reading comprehension let me restate my point:

I'm well aware of what role management plays in projects, however, the degree of qualification and the complexity of work involved with engineers greatly exceeds those of management. It's one thing to say that the company will invest in and develop product X, but it's something quite different to actually develop product X (assuming that your product requires some engineering/research competence).

That study does nothing to address actual value of top executives and instead simply postulates that executive pay should have a tighter correlation to standard employee pay. Sorry but that's not how it works--executives are compensated based on the actual or anticipated value that they will bring to the income of the company not based on fairness.

You, of course, have evidence to show that they do indeed bring value to a company which is in line with their level of compensation, right? Considering that the proposed model given in the study is accurate for 90-95% of the general population (i.e. the model demonstrably works for the general population), it's going to take a lot more evidence than your simple claims to show that not only the top 5-10% are not only exceptional, but are exceptional by a huge margin. Extraordinary claims require extraordinary evidence. Let's see some.

But if you're going to stick to your guns about executive compensation being accurate since the shareholders will surely punish bad management, then I suggest you read this paper since reality does not conform with your predictions.

The problem, however, is that executives’ large compensation packages have been much less sensitive to their performance than has been commonly recognized. Shareholders have not received the most bang for their buck. Companies could have generated the same increase in incentives at a much lower cost to their shareholders, or they could have used the amount spent to obtain more powerful incentives.

As for the shareholder's power in reality, read this.

In the absence of an attempt to acquire the company, the prospect of being removed in a proxy contest is far too remote to provide directors with incentives to serve shareholders.

Finally, I would like to add this paper, which demonstrate that there is in fact a substantial amount of cronyism between corporate boards and CEOs.

The Enron debacle and the Global Crossing bankruptcy have renewed concerns about the effectiveness of board monitoring and the compensation of directors. This paper investigates whether overcompensation of directors and CEOs is related to firm underperformance. We model CEO and director compensation using a variety of firm characteristics, CEO characteristics, and governance variables. We find that director compensation is closely related 20 to the monitoring and effort required of directors to ensure value maximization. Nevertheless, after controlling for monitoring proxies, we also find a highly significant positive relation between CEO and director compensation. We hypothesize that this relation could be due to unobserved firm complexity (omitted variables) or to excessive compensations of directors and managers associated with an environment of ineffective monitoring, which is termed cronyism in the popular press.

We test these alternative interpretations by relating future firm performance to the portions of CEO and director compensation that are not related to firm characteristics, CEO characteristics, or other governance variables. We hypothesize that if the positive relationship between CEO and director compensation is due to omitted variables, the relationship between their additional compensations and firm performance should be weakly positive. In contrast, if the positive relationship between CEO and director compensation is symptomatic of cronyism, then the relationship between firm performance and excess compensation should be negative. The evidence is consistent with the latter hypothesis.

Yeah, I'm sure those CEOs really add plenty of value...

[The Kernel]

I've actually participated in the Nokia development chain and actually sees what's going on in the development process. I've also worked with NRC in the past.

Good for you. I helped conceive and launch a Nokia branded high profile service (as the lead product manager for the project), worked with them for two years to develop it and oversaw a co-development effort across three continents. I've worked with virtually every software focused executive at Espoo, so unless you can claim anything remotely similar you are barking up the wrong tree--I saw firsthand the issues with Nokia from top to bottom.

Categorising Nokia's problems as lack of vision upper management is severely one-dimensional at best. There are numerous organisational issues also involved with the actual product development process which lead to severe headaches for developers and researchers. E.g. Current recruitment into their Maemo and MeeGo development teams is a severe pain in the arse that has absolutely nothing to do with the vision of upper management.

It has everything to do with the vision of the executive team considering that they failed to even recognize the importance of smartphones and their utter lack of competitiveness in the field. Instead of actually promoting a cohesive plan to deal with the threat of Android and iOS they simply kept on milking Symbian and lost massive amounts of marketshare as a result.

Or didn't you notice that they just replaced their CEO over just this issue?

A lot of the issues involved with sticking to Symbian also surround the working environment of Finland and the sheer number of Symbian developers working both for Nokia and the number of other subcontracting companies operating locally that also provide developer resources to Nokia. As result there is a significant amount of operational inertia behind Symbian that spans far greater than role that upper management plays.

Yes, I'm well aware of the bureaucratic issues at Nokia and the operational inertia but they are problems that stem from no clear leadership on Nokia's smartphone strategy. Microsoft had all the same issues with legacy Windows Mobile development and they still managed to make a clean break and transition to WP7. RIM is also planning to completely transition to QNX and they have even worse problems then Nokia in this regard since most of their customers are businesses who don't like this kind of change.

Besides, it's not like they had to throw Symbian away, just push it further and further into the low end of the market. Instead they treated Maemo as a science project for years and didn't put any serious focus into in, choosing instead to put all their hopes into a tweaked Symbian design. This was a stupid mistake and they are paying for it by bleeding marketshare.

Seriously? Where the fuck did I claim that engineers just clobbered projects together? The word "strawman" suddenly leaps to mind. Since you clearly failed reading comprehension let me restate my point:

I'm well aware of what role management plays in projects, however, the degree of qualification and the complexity of work involved with engineers greatly exceeds those of management. It's one thing to say that the company will invest in and develop product X, but it's something quite different to actually develop product X (assuming that your product requires some engineering/research competence).

Sorry to burst your bubble but execution, while crucial, is simply not as easily swayed by the actions of a single individual. A good or bad strategic decision by a key executive can mean the difference between billions of dollars whereas you could kill any engineer (or ten engineers) at Nokia, Apple or any other company without any serious impact to their bottom line.

Execution is fundamentally a team effort whereas strategic direction is not. And that's coming from someone who is entirely focused on the execution side of things and only dabbles in strategy.

You, of course, have evidence to show that they do indeed bring value to a company which is in line with their level of compensation, right? Considering that the proposed model given in the study is accurate for 90-95% of the general population (i.e. the model demonstrably works for the general population), it's going to take a lot more evidence than your simple claims to show that not only the top 5-10% are not only exceptional, but are exceptional by a huge margin. Extraordinary claims require extraordinary evidence. Let's see some.

Don't try and shift the burden of proof onto me, it was you who claimed that executive compensation is out of line to their value now go prove it.

But if you're going to stick to your guns about executive compensation being accurate since the shareholders will surely punish bad management, then I suggest you read this paper since reality does not conform with your predictions.

The only valid point that paper seems to make (I'm not going to spend time reading over all 37 pages if you aren't going to adequately quote) is that corporate boards of directors are driven solely by maximizing shareholder value and that this fact is not easily discernible to shareholders. I agree with that.

All that paper does is prove that shareholders need more transparency and control over executive compensation, not that high levels of compensation are morally wrong.

As for the shareholder's power in reality, read this.

See above. The fact that the process by which executive pay is set is corrupt within many corporations does not change the fact that there is nothing inherently wrong with paying executives lavishly.

Finally, I would like to add this paper, which demonstrate that there is in fact a substantial amount of cronyism between corporate boards and CEOs.

Of course there is. So what?

Yeah, I'm sure those CEOs really add plenty of value...

[/quote][/quote]

If they don't then they are going to be at a competitive disadvantage against companies that hire competent CEOs and pay them more reasonable amounts of money. That's where your argument truly fails--if executives are as overpaid as you seem to think and if this really did cripple the bottom line of organizations then these companies would implode and be replaced by ones that didn't make these mistakes. It's the law of free market economics.

In fact most of your "evidence" is based on companies which went down in flames (such as Enron and Global Crossing), proof that companies that value cronyism over performance are ultimately doomed.

[KrauserKrauser]

Of course all that goes down in flames when the free market is invalidated through government intervention. All the investment banks almost to a man were insolvent or very nearly so in 2008. Thus the free market would have gutted them like the greedy fat shits that they were and they would have gone out of business, lessons would have been learned and things would have changed.

Instead with TARP and the Fed bending over backwards to keep their buddies from feeling the consequences of their actions we have the same CEO payout and structure bullshit that we had before.

Crying "Free Marker Uber Alles!" In today's environment is retarded as the free market is obviously never going to be allowed to work in the negative ways that will incite major change. And if the market is not going to be allowed, then the government, through regulation, is the only other alternative.

[Starglider]

I don't see anyone complaining about Hollywood movie stars earning >$5m a year. In today's PR-focused culture, where stock price is paramount and hangs on each press release, corporate CEOs essentially serve the same function. Shareholders accept these salaries because having someone with an impressive-looking CV, who is on first name terms with other CEOs/politicians/high net worth individuals, and who gives a good speech at the AGM is vastly more relevant to stock price (at least in the short term) than having sound management and strategic planning abilities. Unfortunately people in the former category are in considerably shorter supply than people in the later category, similar to how there are many good actors but very few with the 'star power' movie producers want to draw audiences.

It is an unfortunate and counter-productive situation, but only a total burn-down of the stock market and associated (US-produced) PR culture could fix it.

[aerius]

Taking a quick look at the FTSE 100 company stats, pre-tax profits are up 53% which on the surface would justify the bonuses. However, revenues are up only 2.3% and earnings per share 2.8%, which suggests that the profits were either taxed away, the result of issuing shares, or a combination of the above. I don't have time to dig through 100 quarterly reports to find out what's going on. On top of that you can add fishy accounting, some of the banks for example have claimed profits by reducing or eliminating their loan loss reserves and booking the money as profit.

Going by the earnings per share, dividends per share, and P/E numbers (31.12), the execs ain't delivering. As an investor I wouldn't be buying those shares, period.