CEO Bonuses

[kallend 2,184]

I see that Goldman Sachs has boosted its CEO's bonus at the same time profits dropped.

Interesting article on how CEOs game the system:

http://online.wsj.com/article/SB10001424052748703399204576108680208010522.html

You should start by watching how a board justifies the boss' pay. According to Michael Faulkender, a finance professor at the University of Maryland who has analyzed thousands of proxy statements, the "peer group" that companies choose for evaluating their own profitability contains 31 stocks on average. Meanwhile, when benchmarking the compensation of their chief executive and other top managers, companies compare themselves to an average of just 18 firms.

You don't have to be a cynic to see what this can mean. By comparing its earnings or stock performance to big baskets of companies, a firm increases the odds that the resulting averages will be easy to beat. At the same time, it compares its own bosses' pay to much smaller groups of companies that—perhaps not by coincidence—tend to have highly compensated managers.

Prof. Faulkender found that, among firms that disclose their pay benchmarks, 98% set the target for paying their CEO at or above the midpoint of the peer group. "There was definitely a gaming of the system" among the 429 companies Prof. Faulkender looked at, he says. By comparing themselves to firms with bosses who are amply paid—instead of companies comparable in other respects—these concerns made their CEOs $1.2 million richer a year, on average.

Meanwhile, proxy statements have gotten so incomprehensible, they might as well be written in Ugaritic. "I think there are still a lot of cases where the compensation committee [of the board of directors] could not tell you what's in the [proxy statement] or what it all means," says Kurt Schacht, a managing director at the CFA Institute, the industry group for financial analysts.

Christoph Pereira, deputy general counsel at General Electric, helps write GE's annual pay disclosures—but jokes that he stands over a trash can while he reads the proxies for the other stocks he owns. "The last thing I want to read is a 40-page proxy full of algorithms or a Kafkaesque description of process," he says. "In the Twitter age, people want to know: Is this a good number based on what you've done for me lately?"

...

The only sure way to survive a canopy collision is not to have one.

[billeisele 130]

isn't it interesting when they claim the pay is "market based" but use a different measuring stick for the employees

the concept being that is what they have to pay to attract talent, that theory probably works at lower levels of the organization

I'd suggest that they could cut CEO pay 50-80% and still attract tons of talent

Give one city to the thugs so they can all live together. I vote for Chicago where they have strict gun laws.

[yourmomma 0]

Silly libs, don't you know businesses are the "market" and hence inherently infallible; always self regulating, incapable of self destruction and any malfeasance is a result of individuals not systematic dysfunction. Just sayin'.

Edited: cause I don't know what I'm talking about..