is ceo greed good?

there’s an interesting piece in today’s nytimes on a ceo who asked his board not to pay him so much. this seems to be the new mantra for business press, that any ceo who asks not to be paid is somehow a better form of the species.

why is it that in a capitalist system we (includes me) shower praise on those who seem the least greedy? we admire bill gates for giving away the majority of his fortune, or the ceo who takes $1.00 in salary.

if you had an employee who asked you not to pay him or her so much, how would you react? at first, i’d be psyched and wish there were more like her. but i would also think she wasnt that bright and worry how much intelligence she’ll apply on my behalf if she’s not maximizing her own.

my problem with gigantic ceo pay is less that the person is asking for it and more that their hand picked boards are giving it to them without the shareholders having any real representation. i dont see the solution as finding people who dont want to make a lot of money. there’s an amazingly direct relationship between brains and dollars which isnt going to change.

the answer is more companies run by major shareholders. this can come in two forms. one is the strong founder like a larry ellison or bill gates. the other is the strong owner like rupert murdoch or more recently carl icahn, who can represent shareholders with power in negotiating with equally strong ceo’s.

3 thoughts on “is ceo greed good?

  1. I think taking away a lucrative salary or giving money to charity shows a bit of humanity on part of the individual. When Chrysler was down in the dumps, Lee Iacocca took a salary of $1.00. This was to show an equlity of sacrifice during these tough times. Now, this is admirable. Other than these rare occassions I’d expect a CEO to be paid his worth. Like you said, there is a direct corralation between worth and brains.

  2. A CEO who takes a pay cut is sending out bad mojo about the longterm viability of his company/industry (remember, Chrysler was saved from oblivion by a gov’t bailout). The right way to do it would be to announce your intention to use your entire salary to buy more stock in your company — or how about “puts” in a competitor. Now that would be interesting!
    Think about it: CEO bloodsport. Two chubby white men with bad hair enter, one chubby white man with bad hair leaves!

  3. You have to look at how much stock the CEO holds in the company, or how many options he/she has vested.
    It’s so naive when people gush over the $1 salary thing when the CEO is meanwhile sitting on 15-25% of a company and hundreds of millions to gain from stock appreciation.
    But yeah, spot on post. If the ceo had no stock incentives (unlikely) and no salary, it sounds like more of a non-profit enterprise to me!

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