Successful CEOs are as indispensable to their companies as Super Bowl-winning quarterbacks are to their teams.
As millions of Americans watch the Seattle Seahawks take on the Pittsburgh Steelers, every minute of the game will be scrutinized, with slow-motion replays and a torrent of statistics. But, amid the cheers and groans, don’t expect to hear complaints from fans about the players’ multi-million dollar salaries. Fans know just what the players had to accomplish to reach the Super Bowl and recognize that the players have earned their pay, that the MVPs are indispensable to their teams, and that it is morally proper to reward achievement.
Yet MVPs of the business world are not admired for their achievements, but reviled as overpaid fat cats. Many people are indignant about CEOs collecting pay packages worth upwards of $230 million a year and enjoying perks like corporate jets for personal use. Astonished to learn that what an average worker earns in a year, some CEOs earn in less than a week — people ask themselves: "How can the work of a corporate paper-pusher be worth so many millions of dollars?"
The answer is that successful CEOs are as indispensable to their companies as Super Bowl-winning quarterbacks are to their teams. They earn their rewards.
How big an influence can one man have on the fortunes of the entire corporation? Consider the impact of Jack Welch on General Electric. Before his tenure as CEO, the company was a bloated giant, floundering under its own weight. Splintered into dozens of distinct and inefficient business units, GE was scarcely making a profit. Welch turned it around. He streamlined and reorganized the company’s operations and implemented a sound business strategy yielding more than $400 billion worth of shareholder wealth.
In business, success requires long-range thinking. But CEOs must project a strategic game plan in terms not merely of a month or two, but of years and decades. A biotechnology company, for example, may spend 15 years and billions of dollars developing a new cancer-fighting medicine. Success is impossible without the business acumen of its CEO. For years before a marketable product exists, he must raise sufficient capital to sustain the research. What long-term business model will attract venture capital? Should the company accept short-term partial sponsorship from a large drug manufacturer in exchange for a modest royalty on the drug in the future — or risk going it alone and possibly running out of funds? It is on such decisions that a company’s success is made — and lives of cancer patients may depend.
In order to be successful in the long range, the CEO’s strategy must encompass countless factors. He must devise a plan to grow the business in the face of competitors, not only from within the United States but from any and every region of today’s global economy. The CEO calls the plays for a team of tens (and sometimes hundreds) of thousands of workers. All of the actions of every employee and every aspect of the business must be coordinated and integrated to produce the cars, computers or CAT scanners that yield profits to the company. It is the CEO who is responsible for that integration.
To successfully steer a corporation across the span of years by integrating its strengths toward the goal of creating wealth and requires from the CEO exceptional thought and judgment. Excellent CEOs are as rare as MLB-caliber pitchers or NFL-caliber quarterbacks. And in the business world, every day is the Super Bowl. There is no off-season or respite from the need to perform at one’s peak.
Given the effect a CEO can have on a company’s success, we can understand why their compensation packages can be so high. One way employers reward excellence is through bonuses. For many CEOs, bonuses amount to a large portion of their earnings. Some CEOs are paid a token salary, but are rewarded with large parcels of company stock. As is the case with athletes and other individuals whose talents are rare and much prized, the CEO’s pay package is calculated with an eye on the competition. Companies pay millions of dollars to a valuable CEO, one who they judge will produce wealth for the shareholders, in part so he will not be hired away by a competitor.
On the gridiron, the baseball diamond and the basketball court, we see and admire the physical prowess of a superlative athlete — one who earns the title of MVP — and we understand that it is morally proper to reward him accordingly. Though the efforts of CEOs are not televised on Monday Night Football, their achievements are real and have a profound benefit to all our lives. It is time that we learned to appreciate the work of successful CEOs and recognize that they deserve every penny of their salaries.
They ‘earn’ their rewards? Give me a break!
I average 70-hour work-weeks, and my company pays me no different than for a 40-hour week. Many tradesmen get over-time and work about the same hours I do, but I guarantee you they make about the same as me. No one can argue that great athletes aren’t people born with a great talent which they must work to perfect if they want to reach to pinnacle of their avocation. Likewise, fast track corporate executives have talents that move them to the forefront, and which the rest of us lack. But, $230-million/year is about 100 times what the average pro-athlete makes and about 5,000 times more than your average high-school football star will ever make. The same can be said for the thousands of people who put in long hours working for corporations, without whom those $230MM executives would be making something more commonplace. I have worked for big corporations most of my life, and I have seen some who are great performers and some who aren’t. Not to say they are slackers, but some really don’t have all the talent you attribute to them. Even the ones that do, however, aren’t contributing 5,000 times as much as their more creative and driven workers.
There ‘is’ a huge disparity between the contributions top executives make and how they are compensated. But, that is okay. The important thing is none of us are being forced to work for an insufficient wage. If these guys are making the right moves that bring in good contracts and make us a leaner, faster company that generates more jobs for more people, then their obscene salaries and stock options are fine. If it is merely the perception that they are great executives and that makes investors confident buying our shares, then that is great too. The point is that, there is a perception a corporation is only as good as its top executives. If a corporation cuts a top guy’s income, investors worry something is wrong and start to sell. Cutting executive salaries never increases our share at the bottom, and can only hurt a company’s bottom-line. When a company suffers and underperforms, jobs are cut starting at the bottom; not at the top.
There is a moralistic streak in most people that informs us there is something wrong in anyone getting more than they’ve earned. Liberals automatically assume for one person to have more, someone else must be getting less; and they equate this with theft. How can something be stolen from you that you did not have? Corporations provide jobs to millions of Americans, and are the source of the healthiest economies and highest standards of living. Free markets (and not morality) dictate that, for this to be so, executives will be compensated disproportionately to provide the incentives to compete to make the best corporations. As executives strive to get the top job and highest compensation, they drive their workers to work better, smarter and more profitably. This attracts more business, marginally increases compensation at lower levels, and generates more jobs for others. Thus, nothing is stolen, only assured.
If it is in this sense that you mean executives “earn” their obscene salaries, then I don’t disagree with you, but they do so only as a figurehead for the efforts of the hundreds of people under them who work every bit as diligently and creatively.
I agree. Successful CEOs earn their high levels of compensation.
Unfortunately, far too many unsuccessful CEO’s are also compensated far beyond their levels of success. Then, when finally pushed out the door, they receive yet more compensation in the form of the “golden parachute”.
When an underperforming CEO receives compensation equivalent to 5000 times that of the average employee in the company, that is excessive. When that CEO receives large bonuses while the company underperforms, one must question the oversight of the board of directors.
No, there is an extreme concerted effort to find EXPERIENCED talent when finding people for top management.
This helps to create the endlessly increasing concentration of wealth.
Learning to identify and improve new talent would be the courageous and nation benefiting thing to do but we don’t hammer on our public corporations for, excellence in all ways, nearly as much as we should.
Corps also reveal their bad attitude when they constantly say that bus. school don’t give them what they want and they don’t do anything about it.
The whole nation has a bad attitude about education, its the liberals fault, and we should not allow them to get away with it.
It think most corps support liberalism, and just general freaky behavior, tremendously even though most people assume otherwise — we need a revolution the populous opening demanding conservative as in RATIONAL behavior all public corps.
For example why was Enron allowed to create and new market without complying with old standards and without oversight — what happened was just STUPID and INSANE !!!
Another example, the true revolution of Martin Luther King Junior was not JUST nonviolence it was also to use local savings and loans to keep money circulating thru black neighborhoods, something whites used to do but blacks did not. Its obvious to me that there was a secret backlash or revenge by politicians against the savings and loans once the public had thoroughly forgotten.
Once most of the S&Ls were go the concentration of wealth just went nuts and the middle class disappears.
One day the wealthy will get a clue and wish the USA had a healthy middle class once again.
You know the current old men, which would currently be in the wealthiest classes are well documented to have severe lead poisoning and that makes them very violent and have much lower IQs.
If you look at the number and quality of financial leaders, capitalist role models, between the 60s, when Hughes disappeared, and the 80s there are almost none.
And today the role models order then Bill Gates, Steve Jobs, Larry Elision, the numbers are very few.
BUT on the other hand if you call rock stars and socialism fighters role models then there were many in that age group.
Remember the NAZI party called themselves socialists. Christ is on the right, the NAZIs and ALL other dictators are on the left. Once you understand this and the “Party of Slavery” history of the democrats then all behaviors become easy to understand.
this writer hasn’t a clue on how a CEO gets his job. WSJ and NYTimes, et al, give a more balanced pic. of current over compensation of CEOs. It’s gotten so bad and over-the-top, even conservatives are worried. Most corporations now only have a few thousand employees… but to cut the workers pay in order to over fund a CEO who is only hired as he is a crony of the Board of Directors..(not stockholders, nor “employers”, nor by competition…but selected by social class…. are such CEO’s chosen), that further erodes US competitiveness. For example, Euro and Asian corps which produce better goods do not pay such excessive salaries to the leading crony capitalist pig…… as in Enron. CEO’s are handpicked by their friends who often are CEO’s of other companies while being in the network of Oligarchic monopolists who hire each other to keep the proceeds of the work of others. The fact is, that our companies could lose their CEOs and probably work just as well with lower paid managers.
and the last comment about Hitler being a ‘socialist’ is so ignorant. Hitler at the behest of his handlers (German military) took over a nominally Socialist party and with his thugs eliminated the so-called Socialists in that party and kept its’ name as it was a popular and still popular image in Europe and generally ‘socialists’ are seen a good. But Hitler was thru and thru a Conservative Reactionary to the full extent which is why he was bankrolled by leading conservative businessman (including our present President’s grandfather). To hear yet another conservative bring out this fantasy of Hitler being a ‘socialist’ is proof that conservatives are ill informed and generally stupid. (when i was a young 12 y.o. ‘conservative’ I too thought
“Right” was right. (I was so wrong!) Read books such as the Rise and Fall of the Third Reich to illuminate your fantasies of Hitler being a “socialist”.