CEO's and Corporate Salaries

I find that lots of people are very angry and passionate about this subject all of the sudden. They see failing companies, some of which the government feels are worthy of using tax money to save, and wonder why on earth the CEOs of these companies are receiving such large amounts of money. It seems unfair to see our tax dollars lining the pockets of men that have "failed" their companies and we're starting to get angry about it. In many cases, I think our anger might be justified. I'd like to mention a couple scenarios that I think might be useful when addressing this subject.

Imagine you're the owner of a very large company. Your product lines are vast and diverse and your sales figures are in the millions, we'll say $10 million. Your profits have pretty much stayed at that same figure for several years now, and you realize that with encroaching competitors, this figure is going to need to increase and you're going to need to expand or else get out of the market. You hire some brilliant new talent. Your new CEO seemingly works 80 hours per week, tirelessly coming up with new ideas and brilliant strategies. When he\she goes home at night, he\she goes home to a stack of emails, voice mails, and tweets, some needing his\her signature, others just updates and figures that will likely keep him\her up until the wee hours of the morning, the time other people get to sleep. After the year is over, instead of the normal $10 million, you find that your profits have sky-rocketed to around $100 million. The question is, how much was the CEO worth to you? Your projected profits were going to be around $10 million, and your CEO has made $90 million above that. Would it be fair to say that your CEO is indeed worth $90 million to you? How much of that would you give them? Half? A quarter? Would you be willing to pay someone $45 million to bring in $90 million in profits? I sure would.

Lets flip the situation, and this is where things might get a little dicey. Your company has been around a long time and in the past has been very successful. Through whatever reason, you now find your company losing $100 million dollars per year and you've decided to make some changes. Time however, is of the essence, and you're running out of assets and cash with which to run your company. You decided to bring in some bright new talent from a company that has recently increased it's profits from $10 million to $100 million. (see above situation :) ) The new CEO shows up and gets right to work, working tirelessly throughout the year. When the end of the year comes, instead of seeing a $100 million dollar loss, miraculously, you've only lost $10 million. The question is, how much was the CEO worth to you? Your projected losses were going to be around $100 million, and your CEO has reduced that loss by $90 million . Would it be fair to say that your CEO is indeed worth $90 million to you? How much of that would you give them? Half? A quarter? Would you be willing to pay someone $45 million to reduce $90 million in losses? Just something to think about.

Should our tax dollars be used to make up for the $55 Million in losses that the company accrued (CEO salary about 45 Million + 10Million in operational losses)? Well that all has to do with the politics, and has very little to do with the company and what they paid their CEO. A company looking to survive is willing to pay huge amounts, hoping for even larger improvements. Maybe we should be angry at the people that gave away our tax money, and not at companies asking for money to continue changing things around. You see, the company is almost always going to do what's in the best interest of the company. Does the government always do what's in the best interest of the American people? Maybe I'll save that for another blog.