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estesbob
Guest
Depends on if they really need the 5 they lay off.
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consumedconvert
Guest
Simply pointing out a sad reality. Unless you’re dealing with an extraordinary top man, greed wins every time.
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goofyjim
Guest
We obviously don’t consider whether the 5 need an income. What’s more important is that the million dollar person keeps his unnecessary million dollars.
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consumedconvert
Guest
That certainly does wiegh into it. I was assuming they did.
If they really do not need them, they should go. But if product or services would suffer, the big guy should take the hit.
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goofyjim
Guest
Which is my point. We have no interest in capping salaries but we will find ways to cap wages. Shame on those who think this way.
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stinkcat_14
Guest
Also depends on whether the CEO would quit and go someplace else if they cut his salary by $100k. If he wouldn’t quit and go someplace else, cutting his salary would be a no brainer. Although, I imagine the CEO might not like the idea.
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goofyjim
Guest
You mean the CEO might actually need the million dollars? Where’s my violin.
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mapleoak
Guest
If they really do need them, it would be pretty stupid to let them go, wouldn’t you think?
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consumedconvert
Guest
If I were on the board and the CEO threatened to walk out after said paycut, I’d say argue we (the board) should say good bye and offer his job to the #2 man.
After all, there are people out there who can lose or make just as much money for less. Boards get obsessed with superstar names, and salaries.
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mapleoak
Guest
Innovation is sparked by desire, not compulsion.
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consumedconvert
Guest
Many co.s would let them go. They could make up the staff loss by hiring pt teenagers, after firing people who made real money and actually knew what they were doing. Sales or Service would suffer; see post on Circuit City above.
Or they can outsource to a firm in India.
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consumedconvert
Guest
Unfortunately many CEOs would make that choice, either because they see standards slipping across the industry and decide theycan get away with it, or…
…they know they’ll be long gone by the time consequences come and hurt the co.
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stinkcat_14
Guest
Of course, many people who are on the board are there because they are recommended by the CEO. If they owe their existence to a particular CEO, then they are likely to be more loyal to the CEO than to the shareholders.
Of course, this probably also explains why Warren Buffett is on so few compensation committees, because he is not always kind to CEOs.
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stinkcat_14
Guest
I find the Circuit City case interesting. Is it moral for a CEO to accept a $7 million salary when the shareholders have lost 75% of their money in the past year?
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consumedconvert
Guest
Good point. I guess the moral of the story is, try your best not to be one those five guys. Unless the top man is extraordinary, those guys are screwed.
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consumedconvert
Guest
I’ll lose them just as much money for half as much!
Can we even call that capitalism?
NO.
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stinkcat_14
Guest
Kind of like an electrician who screws up your wiring, causes a fire which burns down your house and still sends you a bill.
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vern_humphrey
Guest
And the shareholders should fire him.
But this is difficult to do, because of laws Congress passed to hamper “hostile takeovers.” This is an example of the cure being far worse than the disease. Especially since hostile takeovers were basically re-structuring failing businesses!
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estesbob
Guest
Is it immoral to try to make profound regulatory decisions based upon circumstances at one company?
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goofyjim
Guest
Fine. Don’t cry foul when these guys at the lower end never earn enough to be in a taxpaying bracket. They can still qualify for the same standard deduction, personal exemption, and IRA contribution as any other worker and if this eliminates their tax liability while the top exec continues to pay taxes, so be it.
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