High Executive Pay

The flap over executive pay is getting louder. There are those that grumble about bad CEOs cashing in. The complainers would give compensation only those executives who do a good job while at the helm of a company.

One problem needs resolution before executive salaries can come down to an Earthly standard.

One of the biggest problems is what the CEO knows about the company. Good CEOs are tempted to competitors because of their skill at running a company. A competitor would gain an edge by hiring the successful executive.

That prospective executive knows all about the business from the old company. He knows the production costs, and limitations of the company. In short, he knows where all the bodies are buried. If allowed to set up shop with a competitor, he could possibly ruin the business with just his intimate knowledge of the inner workings of his previous company.

Most boards would rather meet or beat the competitors offer just to prevent havoc to the business. Remember, bad CEOs possess that same intimate, inner working knowledge of a company. It is by far cheaper to retire the executive with a golden parachute than to have an ex-CEO sharing what he knows with another company.

It is not a reward for doing poorly as an executive. It is a way of getting rid of an executive that will not hurt the business.

In short, these guys are bought off because of what they know rather than anything to do with business performance.

Cheers,

-Robert-