Comments on: When shareholders topple CEOs http://blogs.reuters.com/felix-salmon/2012/05/08/when-shareholders-topple-ceos/ A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: pghwrites http://blogs.reuters.com/felix-salmon/2012/05/08/when-shareholders-topple-ceos/comment-page-1/#comment-39158 Thu, 17 May 2012 17:04:51 +0000 http://blogs.reuters.com/felix-salmon/?p=13817#comment-39158 http://foundersforum.gmiratings.com/2012  /05/oh-thats-what-they-mean-by-going-do wn-with-the-ship.html

A belated response from my blog.

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By: realist50 http://blogs.reuters.com/felix-salmon/2012/05/08/when-shareholders-topple-ceos/comment-page-1/#comment-38843 Thu, 10 May 2012 05:02:56 +0000 http://blogs.reuters.com/felix-salmon/?p=13817#comment-38843 Attempting to tie shareholder toppling of CEO’s to the Occupy movement is laughable – unless I’m supposed to believe that the Carl Icahn’s and Dan Loeb’s of the world are now part of the Occupy movement. With a few exceptions – which become virtually non-existent once you reach really large market cap companies – CEO pay is such a small percent of company earnings that the financial impact is muted.

The real issue with board cronyism, and what really does have a financial impact to shareholders, is a board that isn’t willing to perform its job of overseeing management. Excessive pay for mediocre performance is a symptom, so it can be a useful metric as a signal of other problems, but the real issues are a board that won’t question an imperial CEO as he or she runs the company into the ground. Said differently – a board that won’t question the pay of a mediocre or poor CEO also isn’t very likely to fire a mediocre or poor CEO, which is the real problem. That’s why you see activist shareholders focused on company strategy and changing management, not whether the CEO makes a few million more or less.

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By: Enable http://blogs.reuters.com/felix-salmon/2012/05/08/when-shareholders-topple-ceos/comment-page-1/#comment-38777 Tue, 08 May 2012 19:30:15 +0000 http://blogs.reuters.com/felix-salmon/?p=13817#comment-38777 The biggest problem in corporate finance today is the agency problem. Until we resolve this problem, all others are just whistling past the graveyard.

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By: majkmushrm http://blogs.reuters.com/felix-salmon/2012/05/08/when-shareholders-topple-ceos/comment-page-1/#comment-38775 Tue, 08 May 2012 18:59:41 +0000 http://blogs.reuters.com/felix-salmon/?p=13817#comment-38775 Actually, I have a very simple approach to deciding to vote for or against the CEO pay packet. I simply divide by 24. If the result is roughly what their average workers are making, fine. If not, the answer is no. It is not a vote on his or her’s performance, it’s a vote on their pay packet. If they don’t want the job for a reasonable amount of money, fine, they can move on. They need to be put on notice that they are not indispensable.

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By: Matthew_Saroff http://blogs.reuters.com/felix-salmon/2012/05/08/when-shareholders-topple-ceos/comment-page-1/#comment-38772 Tue, 08 May 2012 17:42:14 +0000 http://blogs.reuters.com/felix-salmon/?p=13817#comment-38772 I would note that behavioral psychologists have noted that excess compensation decreases performance.

Dan Ariely has written about this.

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By: dWj http://blogs.reuters.com/felix-salmon/2012/05/08/when-shareholders-topple-ceos/comment-page-1/#comment-38770 Tue, 08 May 2012 16:56:42 +0000 http://blogs.reuters.com/felix-salmon/?p=13817#comment-38770 You’re saying that CEOs will interpret objections to their pay as intentions to fire them, “like Andrew Moss”, even when votes are perfectly clear that that is overwhelmingly false? What would trigger this sort of mass confusion?

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By: KenG_CA http://blogs.reuters.com/felix-salmon/2012/05/08/when-shareholders-topple-ceos/comment-page-1/#comment-38767 Tue, 08 May 2012 16:30:13 +0000 http://blogs.reuters.com/felix-salmon/?p=13817#comment-38767 Yesterday, it was about how the institutional investors aren’t holding VC’s accountable for their less than stellar performance (to put it mildly). And today you’re hoping those same institutional investors start holding boards and their CEOs accountable? Why the disconnect? The large institutional investors effectively control the boards, and they usually act as a rubber stamp for them. And since boards are typically comprised of CEOs, they usually are very generous to their top execs. What’s going to wake them up all of a sudden? Are they going to get fired if they don’t provide more oversight for CEOs?

While I’m not a pessimist, I don’t see this change happening, without external forces driving it. Corporations were created to distribute ownership of a business, but they have morphed into a vehicle for individuals (often insignificant shareholders) to enrich themselves at the expense of the company. This is a flaw in the “free market” economy, in that executives don’t do what’s best for the company, they do what’s best for themselves. As a result, companies often hoard profits, rather than distribute them (and incur double taxation) or re-invest them (and assume personal risk for those investment choices).

The government can force companies to implement one of those two options with a well-designed tax system (here I go again). If profits that are distributed as dividends are exempt from corporate taxes, companies will have more incentive to pay dividends (where they will be taxed at the individual ordinary income rate). When this becomes more common place, the stock price (of mature companies) will more readily reflect the performance of the CEO, and when dividends and prices are down, they will be held accountable. Currently, so few companies pay dividends that justify their price, so it’s not often used as a yardstick. We need to make corporate performance more transparent, and letting shareholders directly benefit from profits will help that happen.

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By: FifthDecade http://blogs.reuters.com/felix-salmon/2012/05/08/when-shareholders-topple-ceos/comment-page-1/#comment-38766 Tue, 08 May 2012 16:04:10 +0000 http://blogs.reuters.com/felix-salmon/?p=13817#comment-38766 Is this finally an outbreak of reality setting in? I hope so – it’s been absent from the world of the corporate executive and investment markets for some time now. However, the honourable resignations in the UK contrast with the lack of such moves in the US, according to your report. So I can’t see why you suggest the Occupy movement is the cause – they are practically invisible in the UK yet reportedly everywhere you look in the US. Occupy seem stronger where CEOs hold on until the last greedy fingertip can be prised off the pile of gold they cling to, limpet like.

That raises an interesting question: Are CEOs responsive to the complaints of the 99% as enunciated by Occupy, or is the Occupy movement a response to the amount of greed displayed by CEOs? Your report would suggest the latter, since the UK CEOs took the hint and went.

Hardly surprising really since the UK is suffering from rampant austerity which is destroying growth, while the US has managed to grow and has thus protected CEOs from the ravages of a shrinking economy. Ironic then that the actions of the CEO supported GOP to introduce more austerity into the US economy through blocking Obama’s economic plans to save it could, if the UK model is repeated, mean US CEOs lose their jobs or have to take pay cuts when austerity hits the US economy as a result of their support for the party of the 1%.

I love irony. It can really hurt when it hits!

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By: Zdneal http://blogs.reuters.com/felix-salmon/2012/05/08/when-shareholders-topple-ceos/comment-page-1/#comment-38763 Tue, 08 May 2012 14:53:07 +0000 http://blogs.reuters.com/felix-salmon/?p=13817#comment-38763 I disagree. I think plenty of shareholders believe that CEO compensation is a problem even if the CEO is performing well. CEO packages frequently insulate the CEO from consequences of poor performance while rewarding CEOs for market wide phenomena.

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