It is most certainly an organizational development question to determine the take-home pay of top executives. We can similarly discuss the high compensation for entertainment celebrities and sports athletes.
As CEOs create jobs, impact work-life and stimulate the economy, we should safeguard high salaries to CEOs - as we need to attract top talent there!
While CEO "greed" is certainly alive and well, it finds many exceptions and is not a direct fallout of tax breaks. In fact, taxation needn't have substantial impact on executive salaries at all. Wherever you find a greedy CEO, you find a CEO who will take whatever she or he can regardless of net profit impact. Compensation in any U.S. company is more a factor of supply, demand, job retention and market conditions than anything else.
Tax breaks are intended to lure corporate behavior likely to create net positive impact on the economy. These incentives are used to create jobs, stimulate economic spending and increase the many other taxation opportunities which fund our government.
Tax breaks to "big oil companies" should be considered in exchange for actions that heal the economy, such as the lowering of fuel costs to the public. With proper structure and surrounding conditions, this tax break could provide a positive net economic impact.
While we need to avoid tax incentives as currency to special interest group and campaign fundraising, let's keep the discussion focused on the "how" and "why" we propose tax breaks. Let's also consider the individual taxes paid on salaries, personal spending and economic impact of the personal investments of CEOs. Without that language, we haven't enough information to comment.
As a CEO who does not practice greed, I think and behave like many CEOs who think as shareholders, and I choose to protect company value, the supporting team/infrastructure and my future as the CEO. CEOs answer to the shareholders. These strategies are the subject of board meetings and MBA programs.
CEOs in large companies may have the shelf life of a pro football player, and if we want to attract top talent to these economy-driving opportunities, as a country we must offer a large incentive package. Where publicly traded companies may wish to empower a "celebrity" CEO to drive shareholder confidence, CEOs must be lured from one high-paying opportunity to a higher-paying opportunity. Done well, this creates overall positive economic impact.
With the pyramid shape of a large company, competition abounds. Power and high compensation are fragile here as many others are grooming and gunning for your spot. If you don't move up, you move out. Once at the top, it's far too easy to get pushed off that pedestal. This may be career-ending, as experience isn't entirely transferable and few companies wish to pay you for what you did for someone else.
If you don't believe the disconnect between corporate taxes and CEO salary, then spend a little time researching the high CEO salaries of the many giant companies who post annual fiscal losses - yielding no income taxes paid to the government.
Anyone who has studied business in depth knows these principles to be true. The United States needs first and foremost a president who inspires confidence. It concerns me - no, angers me - that a political party would use lack of education as a weapon against the very sector of our population that it pretends to represent - and protect.
Less education can be a fallout of less financial resources - the people the Democratic candidate, Barack Obama, pretends to support. So why make such wittingly false claims to the people you represent? I love Democratic ideals and am a centrist at heart. I tend to agree with Republican fiscal policies. I tend to vote Republican because I believe in the foundation American principles of capitalism.
I believe the answer lies neither at extreme left nor extreme right. I have specific ideals and blueprints for action. I support the working people. I support people who work as hard, and even not necessarily as hard, as I do. I refuse to support people who don't do their best and look for a payout due to some sense of entitlement. There is no such entitlement. If you don't believe me, look up "free enterprise," the backbone of U.S. principles in business.
Jessica Ollenburg is president and chief executive officer of Human Resources Services (HRS) Inc., a Waukesha-based company that provides management solutions fo research related to organizational development and HR.
13 Comments
As someone who has spent a career studying and researching competitive strategy, business ethics and corporate governance, the remarks of Ms. Ollenburg ("CEOS deserve high salaries, Oil companies deserve tax breaks") seem so off-the-mark on so many counts that they deserve some comment. While the logic chain and evidence supporting most of the observations of her essay on CEOs, taxation, and "American" capitalism could be questioned, I will limit myself to only two:
(1) CEO salaries at U.S.Fortune 500 companies average about 400 times that of the average worker. In Europe, the ratio is five to ten times less than that. Yet the profitability performance of U.S. and European companies is about the same. In Japan, the average worker/CEO salary ratio is even less; would anyone argue that executives at GM are paid 20 times more than their counterparts at Toyota for good reason? These U.S.levels of CEO remuneration are typically not a result of supply, demand and market factors but are set by the compensation committee of the BOD whose members are selected by the BOD chair, often the CEO. These same Board members are compensated and serve in part at the pleasure of the CEO. This cozy network is hardly similar to the open market for, say, free agent quarterbacks.
(2) It is misleading to talk about CEOs creating jobs and stimulating the economy. Entrepreneurs and investor/owners may do these these things but CEOs are basically "agents" who help coordinate the efforts of many parties in the complex corporation. Jack Welsh did not "create" $400 Billion in wealth at GE; it took the efforts and dedication of 1000s of scientists, engineers, managers and staffers for that happen. Even then, financial outcomes are partly due to the vicissitudes of business and economic cycles, something that too many top corporate executives are quick to point out when they fail but seldom bother to mention when they succeed.
The system of compensation and performance at the top is fundamentally flawed, I'm referring to the CEOs of the "financial giants". Lets be honest, the people at the top of these companies are traitors to their country and are walking piles of excrement masquerading as human beings. I'm sure that a good portion of CEOs out there care about the country and the public interest. Unfortunately, the top 5% of them are giving everbody else a bad name. Things are going to be a lot different ten years from now.
Jessica you make perfect sense. I worry that while capitalism is not perfect, people are turning toward socialism and "the State" to solve economic issues. History should have taught us well that those ideals are proven failures.
The original title to this essay and the title which remains at our website AskHRS.com is "Election Debate: Impact of CEO Salaries on the Economy." While I understand the new journalistic twist on the title throws a better punch, and while I retract no assertions I have made in this article, I do not agree with and did not approve the title change. It changes the tone and misrepresents the conclusion. Let's evaluate CEOs one at a time. Many CEOs do great work and are not greedy. To ignore these great entrepreneurs is unpatriotic.
Additionally, HRS is not a staffing service. HRS provides management solutions and research related to organizational development and HR.
Executive level pay should be decided by the Board who represents the shareholders not the executives. Shareholders should then keep tabs on the Board to guard against collusion between the Board and CEO. A tax system should be fair and transparent. Having the government favor certain industries is bad policy as it leads to economic distortions. If the goal is to get off fossil fuels, then increase the use/sales tax rate for gas and such.
So, let me get this straight; you have no counter to Gene's excellently illustrated points, but you do wish to make an excuse for yourself via your editor? Ahhh. You know you're wrong, AND you have zero backbone? Come on, Jessica. Anyone can see that U.S. CEOs are vastly overpaid in comparison to CEOs in more free market economies. I find it comical that somehow someone as biased as yourself is trying to lead people to believe that the majority of CEOs genuinely care about their workers on the ground floor. If they cared about them, most CEOs could name their employees. I would bet that 99% of CEOs neither know their lowest-rung employees' names, nor do they care to learn them. They simply wish to make ridiculous amounts of money and jump to the next executive position with a higher pay-grade, at a more prestigious company. The system is extremely flawed. Anyone can see that. It is this system of elitism that has put us in our current economic predicament. Things need to drastically change when the CEO of Washington Mutual, Alan H. Fishman, works just 17 days and gets a settlement for 20 million dollars. No, you're right things are just dandy.
Oh, and surprise surprise; you are a Republican...worse a John McCain Republican. You and your fake moderates will drive this country right in to the gutter. CEOs and companies need to be held accountable for their irresponsibility, not simply given a 'get-out-jail-free-card', so that they can go take more money from starving people on the bottom of a company's infrastructure. Again, wake-up. The world we live in is about more than CEO greed, it is about accountability on every level.
Me? I am truly non-partisan. I think both parties have lost sight of America, and what it has been all about for over 300 years.
Mr. Bushy (if that's your real name) - you clearly have a chip on your shoulder. With your betting "99%" against the existence of some great CEOs in our great country, I highly recommend you avoid the casinos. Mr. Laczniak addresses one sector of the CEO market. Small to mid-market CEOs are in greater number, and let's not disrespect their contributions. Focus, please. I spend vast time and have earned great successes in leadership assessment/development, org development through team building, incentives and enhancing employee motivation. There are some great risk-taking employee-centric business owners, leaders and inventors out there. Many of them use the title "CEO." Show them respect by disallowing this "CEO = greed" election propaganda.
It's teamwork - not blameshifting. The CEOs of HRS clients care about their employees, give back generously, share company profits and know as many names as their memories can hold. Those CEOs invest into their teams, training, listening to and rewarding the people who make it happen. Everyone prospers in this environment! We need to stop the perception that CEO = greed. It's mob mentality that is tearing down employee hope and de-motivating Main Street US. Greed does not exist with many CEOs -- only some, and many of those examples are already on public record. Stick to the point! The good guys aren't enough talked about. Make an example of the great CEOs in this election, which would alleviate Main Street's perceptions and fears. The non-greedy CEOs have earned a right to not be automatically considered greedy just because they are a CEO.
CEOs, BODs, managers at all levels, government legislators, journalists and all employees need to be accountable. Perhaps you should read the article again. Perhaps you should be a little less negative. When Americans have hope, our economy will strengthen. Shame on you for tearing down hope with your stereotyping generalizations about CEOs!
http://www.cnn.com/2008/POLITICS/10/08/politicians.meltdown.aig.ap/index.html?iref=mpstoryview
Jessica:
First of all, my name is meant to point out the fundaMENTAL flaws with our current administration, one of your party's choosing, I might add. If you can't stomach the criticism, maybe you shouldn't take on the presumably tall task of writing an editorial. Follow the above link, you will love it.
And shame on you for bulding up a false sense of value within all CEOs, regardless of your obvious bias, and regardless of how much of a financial drain they put on their respective company. CEOs should not be getting enormous settlements, in turn crippling a company's economic outlook, when 'Joe Six Pack' is being let go due to 'belt-tightening'. That much I know.
Jessica,
You should really re-evaluate your ideas. To be honest, they sound very closeminded and outdated.
Let's recap it:
You flat out told people that:
You should be paid much more than your employees
Your company deserves tax breaks so you might create jobs (which if you were successful you would do anyway subsidy or not, and if you aren't successful the government should prop up your failing business, both of which are very capitalist approach)
You deserve more respect than your employees
and
To ignore you is un-patriotic
First of all, the best way to gain respect is obviously to tell people you should be respected. I also don't understand your link between business and patriotism. So, to be a patriot, you need to make a lot of money, or admire those who have it.
That's quite a stance. I hope you have forward this article to all your clients. You know, to make sure they know your making the big bucks and respect you.
Wow! These bloggers with fake names referring to themselves as "Joe Six Pack" should really put down the six pack and do some reading and do some work. These "shouting in the rain" disjointed ramblings have nothing to do with Ms. Ollenburg's article. I'm not sure who disappoints me more - those who attack without reason or forethought or BizTimes for changing the title and editing this piece to something entirely disjointed from the author's original premise. To then hang the author "out to dry" allowing anonymous bloggers uncensored to respond without good faith, without reading the article and with such incredible personal attacks is disgusting. A person's politics are fair game to respond to -- maybe even attack if passionate enough -- but to attack a person is out of bounds. The author has offered up not only sound rationale but also her website for inspection of the actual blog entry. I'm neither impressed with the Small Journalist Times team for changing a "self-authored" piece, nor the irresponsible bloggers who should have really read the article in the first place. Clearly the publication just wants to sell advertising and subscriptions at anyone's expense. Thanks, Ms. Ollenburg, for your bravery to say what so many of us are already thinking. Most CEOs are not the greedy empty Wall Street types. There are definitely conditions to tax breaks that can help Main Street which shouldn't be dismissed. When people figure that out, we can start to move forward.
Let's ignore the sensationalized title and the incoherent ramblings of those who missed the point, and let's sum up the essential message here. We know that tax breaks and new taxation principles are already bipartisan thinking. Tax breaks properly structured can heal Main Street USA and are not necessarily tied to corporate greed. Tax breaks carefully crafted might even be able to minimize corporate greed. Only a small percentage of CEOs are proven greedy, and they often don't act alone. Misleading the public to think that all employers are greedy is terrible for our economy and our country. Journalists, politicians and managers/employees at all levels can be greedy. All people can be greedy. Election propaganda that creates unnecessary anger and fear is holding our country hostage. Let's put some good news page 1 and maybe through this get some people to boycott corporations proven greedy and patronize the good guys. Let's talk about the good guys and create some hope. Let's shift our support to the ungreedy. Everyone is accountable to results without entitlement, and everyone needs to be rewarded proportionately to those results. If results are huge, so should be the rewards. If results aren't created, don't come crying for entitlement. Election propaganda and the media "editorializing" or selling out for more greed under the pretense of journalism needs to be called out and controlled.