CEO Compensation
InfoWeek - Relics from an industrial economy -
The average chief executive in the United States earned 262 times the pay of the average worker in 2005, according to the Economic Policy Institute (EPI), a non-profit think tank.
In 2005, a CEO earned more in one workday (there are 260 in a year) than an average worker earned in 52 weeks, according to the EPI (Washington, D.C.).
In 1965, U.S. CEOs in major companies earned 24 times more than an average worker; this ratio grew to 35 in 1978 and to 71 in 1989, according to the EPI.
In the industrial economy it made sense for these guys to be making the most (they were at the top of the pyramid) but in a network economy compensation should correlate to flows. Make the most impact, make the most cash. It’s about the ecosystem comprised of individuals, not corporations as organisms.
“In the industrial economy it made sense for these guys to be making the most (they were at the top of the pyramid”
Only for about the top 10 % of CEO’s – the bottom 10 % who were equally well paid were disasters and the vast middle simply presided over the status quo, perhaps tinkering at the margins.
The high level of CEO pay is more a result of cultural prejudice toward received status thinking “this is what these people should earn” -hence rising rewards for CEO’s of money-losing companies. Market factors of competing for top talent raise expectations but as most companies will never realistically hire the top talent, boards o Directors would be better off hiring the brighest, experienced insider who they would never normally consider at a cheap price. Chances are the insider would perform about as well as an outside hire for a fraction of the cost.
” in a network economy compensation should correlate to flows. Make the most impact, make the most cash.”
Make a greater proportion of ownership connect to these productivity flows.
I think you’re spot on. Offshoot: distributing that wealth to the bottom up innovators – who any decent supermanager would rely upon anyway- would probably achieve the same results.